question about roth 401k

[ER_Hopeful]

my new job offers both traditional 401k and roth 401k, I've decided to do 50/50. Both contributions plus employer match all go into a Fidelity brokerage account which eventually goes into several index funds.

question is since roth is tax-free during withdrawal and traditional 401k is taxed, how do I or the IRS distinguish between the two when I take money out?

 

[GrayHare]

The custodian of the 401k will track it, and report withdrawals via form 1099-R, indicating there whether the amount is pre or post tax.

 

[Spock]

when you leave your employer, roll the Roth 401K to a Roth IRA.
This removes the tracking issue (or consolidates it into a single book keeping event vs. annual)
AND Roth IRAs are not subject to RMDs but Roth 401Ks are.

 

[ER_Hopeful]

The custodian of the 401k will track it, and report withdrawals via form 1099-R, indicating there whether the amount is pre or post tax.

But how would the custodian know which portion the withdrawal came out of?
say I put all contributions (401k, roth 401k, employer match) into 4 index funds. I withdrew say 10k during the year, how would the custodian know how to prorate it? the 10k could have been from either contribution or even from capital gains.

 

[MissMolly]

Each account is separate. Each account gets its own 1099. There are no capital gains in 401k or IRA or ROTH accounts. Employer match doesn't matter. It's in a tax deferred/tax free account.

 

[RunningBum]

Each account is separate. Each account gets its own 1099. There are no capital gains in 401k or IRA or ROTH accounts. Employer match doesn't matter. It's in a tax deferred/tax free account.

Aren't those conflicting statements? What 1099 do you get if there's no Cap Gains (or other distributions)?

And the issues is that with some holders the accounts aren't separate. My son has a regular 401K and a Roth IRA and they are in the same account. I think he's in the process of moving it so we'll see how cleanly that goes.

 

[MissMolly]

All money withdrawn from 401k or IRA accounts is taxed as ordinary income. ROTH accounts are not taxed. You will receive 1099-R statements. And I never said there were no distributions. I was responding to ER_HOPEFUL who specifically asked about capital gains and how they are reported on distributions from these accounts - thus my response there are no capital gains in those accounts.

 

[KenZ71]

Don't think the Investments are split traditional vs Roth. So the withdrawal is based on % of contribution.

So in OPs example 50 / 50 traditional vs Roth going in means it is 50 / 50 going out.

 

[Animorph]

DW had a mixed 401k/Roth 401k. So mixed that all we knew was the total value of the Roth 401k. We had 99% of the 401k in a brokerage window with mutual funds. But we had no control, and no knowledge, of where the Roth money was. As far as I could tell the Roth money never grew much (at all?). As if all the growth went into the regular 401k.

Getting it out was interesting at first. They were unable to separate regular and Roth. We had to take a single withdrawal with both regular and Roth money in it and direct it into a single IRA account. Kind of messy! They finally figured out something better after the first year. We took maybe 20% at a time so we could keep everything invested during the rollover. We were limited to one withdrawal every 90 days, so it took a while to complete the move.

Hopefully OP has a better experience now. I felt like a guinea pig. Totally dependent on what your 401k administrator can/is willing to do.

 

[Senator]

AKAIK, all employer contributions go into a non-Roth 401K. 100% of the employer contributions are taxed.

When you take money out of a Roth, it is not taxes. An non-Roth is taxed.

I had an IRA with both after tax money, and pre-tax money. I filled out a IRS Form 8606 and the withdrawals are pro-rated based on the amount you put in after tax.