Selective withdrawal from 401k

Submitted by abraham boznick on Sun, 2023-12-10 05:57

A person has 401k and is over 65. The 401k has a mix of pre-tax and after tax money in it. Can a person do a selective withdrawal of part of pre-tax money only. Or the withdrawal should be made on prorata basis of pre-tax and after-tax money. Thank you.



Submitted by William Tuttle on Sun, 2023-12-10 13:01

  • There is no tax code or IRS regulation requiring prorata distribution between sub accounts. E g. A traditional pre-tax sub account and a designated Roth* sub account.
  • The plan itself may have such a requirement. This is increasingly less common, but you will want to check with the plan administrator.
  • However, there are prorata distribution requirements within sub accounts. E.g. Employee after-tax contributions and pre-tax earnings in an employee after-tax account.
  • *Non-qualified distributions from a designated Roth account are pro-rated from post-tax deferrals and earnings.

Submitted by Alan - IRA critic on Sun, 2023-12-10 17:52

  • Seems odd that this person wanted to withdraw only from the pre tax balance. Usually the participant will want to withdraw from the post tax balance (already taxed) so that the distribution would be non taxable. If that were the case, there is one exception to spiritrider’s 3rd bullet point regarding pro rating within the after tax sub account. If this participant had a post tax balance on 12/31/1986 which was tracked by the plan, the participant could request a distribution of that pre 1987 post tax balance without any pre tax amounts or earnings, making that distribution tax free. 
  • And if the participant has retired from this employer, they could request a direct rollover of the entire pre tax balance in the plan (per Notice 2014-54) with a distribution of the post tax balance to them, or if they did not need the money could have the post tax balance directly rolled to a Roth IRA tax free.

Submitted by William Tuttle on Sun, 2023-12-10 21:20

I forgot about pre/post 86/87 rules.

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