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401(k) after tax contributions 50 yrs old
07-12-2012, 04:13 PM
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#1
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Confused about dryer sheets
Join Date: Jul 2012
Posts: 6
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401(k) after tax contributions 50 yrs old
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?
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07-12-2012, 04:25 PM
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#2
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Thinks s/he gets paid by the post
Join Date: Oct 2002
Location: Chattanooga
Posts: 3,893
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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.
__________________
Earning money is an action, saving money is a behavior, growing money takes a well diversified portfolio and the discipline to ignore market swings.
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07-12-2012, 04:30 PM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,021
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 Quote:
Originally Posted by 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.
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+1
That mirrors my experience.
__________________
Numbers is hard
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07-12-2012, 06:55 PM
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#4
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,369
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Quote:
Originally Posted by REWahoo
+1
That mirrors my experience.
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+2 same here
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07-12-2012, 06:58 PM
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#5
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Full time employment: Posting here.
Join Date: Aug 2006
Location: athens
Posts: 802
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+3 Me too. But beware. That after tax cash will vanish unless you have a plan for investing it quickly.
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Can't you see yourself in the nursing home saying, " Darn! Wish I'd spent more time at the office instead of wasting time with family and friends."
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07-12-2012, 07:17 PM
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#6
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Full time employment: Posting here.
Join Date: Jan 2011
Posts: 586
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Quote:
Originally Posted by 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.
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I plan to convert some of my 401k into Roth IRA. Can I withdraw the over funded amount and use to pay for taxes?
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07-12-2012, 07:21 PM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,021
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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.
__________________
Numbers is hard
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07-12-2012, 07:52 PM
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#8
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Thinks s/he gets paid by the post
Join Date: Oct 2002
Location: Chattanooga
Posts: 3,893
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Quote:
Originally Posted by KingB
I plan to convert some of my 401k into Roth IRA. Can I withdraw the over funded amount and use to pay for taxes?
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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.
__________________
Earning money is an action, saving money is a behavior, growing money takes a well diversified portfolio and the discipline to ignore market swings.
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07-12-2012, 08:59 PM
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#9
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Confused about dryer sheets
Join Date: Jul 2012
Posts: 6
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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.
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07-13-2012, 10:06 AM
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#10
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Thinks s/he gets paid by the post
Join Date: Jul 2005
Posts: 4,366
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I assume over funded means contributions in excess of of the allowed yearly limit. Those would be post-tax contributions.
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07-13-2012, 12:29 PM
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#11
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Thinks s/he gets paid by the post
Join Date: Oct 2002
Location: Chattanooga
Posts: 3,893
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Quote:
Originally Posted by Animorph
I assume over funded means contributions in excess of of the allowed yearly limit. Those would be post-tax contributions.
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That would be correct.
__________________
Earning money is an action, saving money is a behavior, growing money takes a well diversified portfolio and the discipline to ignore market swings.
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07-13-2012, 06:47 PM
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#12
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Confused about dryer sheets
Join Date: Jul 2012
Posts: 6
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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
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07-13-2012, 07:02 PM
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#13
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,021
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Quote:
Originally Posted by 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
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I don't see how this can be the case if what you said here is correct:
Quote:
Originally Posted by SM4456
I’m getting ready to roll over my 401K into my IRA. I have $13,750.00 in after tax contributions.
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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%?
__________________
Numbers is hard
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07-13-2012, 08:02 PM
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#14
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Thinks s/he gets paid by the post
Join Date: Oct 2002
Location: Chattanooga
Posts: 3,893
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Quote:
Originally Posted by 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
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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.
__________________
Earning money is an action, saving money is a behavior, growing money takes a well diversified portfolio and the discipline to ignore market swings.
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07-14-2012, 01:18 PM
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#15
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Confused about dryer sheets
Join Date: Jul 2012
Posts: 6
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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)
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