401(k) after tax contributions 50 yrs old

[SM4456]

I am 50 years old and took a Retirement Incentive Offer due to the selling of my company. I’m getting ready to roll over my 401K into my IRA. I have $13,750.00 in after tax contributions. If I have that portion sent to me in a check will I have to pay the 10% penalty?

 

[frayne]

Nope. I over funded my 401K throughout the years to the tune of $30K+. When I rolled over my 401 into an IRA, I was issued a check for the amount over funded that tax had already been paid.

 

[REWahoo]

Nope. I over funded my 401K throughout the years to the tune of $30K+. When I rolled over my 401 into an IRA, I was issued a check for the amount over funded that tax had already been paid.

+1

That mirrors my experience.

 

[pb4uski]

+1

That mirrors my experience.

+2 same here

 

[tightasadrum]

+3 Me too. But beware. That after tax cash will vanish unless you have a plan for investing it quickly.

 

[KingB]

Nope. I over funded my 401K throughout the years to the tune of $30K+. When I rolled over my 401 into an IRA, I was issued a check for the amount over funded that tax had already been paid.

I plan to convert some of my 401k into Roth IRA. Can I withdraw the over funded amount and use to pay for taxes?

 

[REWahoo]

Yes. You've already paid Fed taxes on that money so you can spend it as you please. There may be some state tax issues but I'm not aware of any.

 

[frayne]

I plan to convert some of my 401k into Roth IRA. Can I withdraw the over funded amount and use to pay for taxes?

AFAIK, you could use the money any way you see fit as taxes have been paid on the amount you put into your 401K in excess of what was allowed during any particular year. Just my two cents but it would be wise to check with the firm that administers your 401K just to be on the safe side.

 

[SM4456]

I want to thank everyone for there responses, but I am not sure what "over funded" means in this instance. The money was put in prior to 1986.

 

[Animorph]

I assume over funded means contributions in excess of of the allowed yearly limit. Those would be post-tax contributions.

 

[frayne]

I assume over funded means contributions in excess of of the allowed yearly limit. Those would be post-tax contributions.

That would be correct.

 

[SM4456]

Back to the original question the post tax money is not in excess if they make a check out to me will I pay a 10% penalty because of my age on the $13,700

 

[REWahoo]

Back to the original question the post tax money is not in excess if they make a check out to me will I pay a 10% penalty because of my age on the $13,700

I don't see how this can be the case if what you said here is correct:

I’m getting ready to roll over my 401K into my IRA. I have $13,750.00 in after tax contributions.

If you made after tax contributions to your 401k, you've already been taxed on that money and you should not be subject to the 10% penalty regardless of your age.

Who is saying you'll be charged the 10%?

 

[frayne]

Back to the original question the post tax money is not in excess if they make a check out to me will I pay a 10% penalty because of my age on the $13,700

Your best bet for peace of mind is to ask your 401K administrator, as REWahoo has stated based on the information you have given you will not be penalized 10% as the money you are taking out was never tax deferred to begin with.

 

[SM4456]

Thank you Frayne that is a good point "the money I am considering taking out was never tax deferred to begin with" I will check with my 401K administrator. The first guy I spoke with at Fidelity did not leave me with a warm and fuzzy feeling. He was not sure when I asked him the question and was going to get back with me, have not heard from him since. This forum has been a great help in the past and I want to thank you all for taking the time with my concern. The total 401(k) is $100,000 Plus (changes each day) I was thinking of taking just the $13,750,00 out of it. The sensible part of me says to invest it in a ROTH 401(k)