After Tax Contributions in a 401k
A client has a 401k balance of $1 million. Included in this $1 million balance is an after-tax contribution balance of $350,000 (itemized as follows: $100,000 represents after tax contributions or basis and the balance $250,000 represents earnings). Can my client rollover the $100,000 in contributions to a Roth IRA and the $250,000 in earnings to a traditional IRA?
Permalink Submitted by Alan - IRA critic on Thu, 2025-02-20 19:35
The after tax sub account balance is typically distributable separately from the rest of the 401k. If this plan allows it, a split direct rollover can be done sending the 100k to a Roth IRA and the 250k to a TIRA. No tax will be due.
However, it is possible that the plan may require a total distribution if client has separated. In that case the split rollover would be 100k to Roth IRA and 900k to a TIRA.
Permalink Submitted by Alan Fishman on Fri, 2025-02-21 12:33
Thanks Alan. I appreciate it.