Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Mega-Roth tax question - basis
Old 12-11-2018, 02:27 PM   #1
Dryer sheet wannabe
 
Join Date: May 2016
Location: Greenville
Posts: 10
Mega-Roth tax question - basis

This is such a knowledgeable forum, I bet someone here has been in my place before.


I have an amount in my 401k that is after tax contributions (after I had maxed out my Traditional/Roth limit.) 2.5% of the balance is earnings and the rest is my contributions.

I have instructed Fidelity to roll a portion out into a Roth IRA. The Fidelity Rep made clear that this would be a taxable event because the 2.5% of my 'withdrawal' was earnings. This I understand.

But I have additional (and much larger) Traditional IRAs with a very small basis and will not be converting any of those IRAs to Roth this year.

Is my Mega-Roth Rollover lumped in with (treated like) my traditional -to-Roth conversions, thus affecting the 'basis' of my Mega-Roth?

What tax paperwork will I receive from Fidelity? And won't it look exactly like the paperwork I receive when I do a traditional-to-Roth IRA conversion?
To anyone who has encountered this situation: I'd like to hear your experience.


Thanks in advance,


WithAPurpose
__________________

WithAPurpose is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 12-11-2018, 05:38 PM   #2
Recycles dryer sheets
 
Join Date: Mar 2014
Location: Dallas
Posts: 434
First off all, Roth IRA is a different account so it should not affect basis of any of your other transitional IRAs.

Secondly, if you want to avoid a tax event all together then there is a way. Fidelity can send you 2 separate checks for "account-to-account" transfer: First check with after-tax contributions (you deposit this to your Roth IRA) and second check for reminder which will include gains on after-tax contributions plus any transitional 401K balance if any (you deposit this to your traditional IRA account).

PS: I did such "split transfer" earlier this year going from Empower to Fidelity.
__________________

pjigar is offline   Reply With Quote
Old 12-11-2018, 06:06 PM   #3
Recycles dryer sheets
 
Join Date: Sep 2016
Location: Way up North
Posts: 243
My 401K is with Fidelity and I do mega-Roth conversions 3-4 times per year. I have 2 IRA accounts set up at Fidelity to use - a tIRA account is where I send the earnings and a Roth is where I send the basis. By sending the earnings to a tIRA, the taxes are deferred until withdrawal. The Fidelity reps I've talked to have all been knowledgeable about the conversion and can do it on line, but it does require a phone call.

You don't have to convert the after-tax earnings to Roth and pay taxes now. You have the option to put them in a tIRA to defer taxes. At least my 401K at Fidelity allows it.
__________________
Retiring in mid 2020 at age 61 from Evil Mega Big Oil Corp (EMBO corp)
Planning on living on:
Social Security +
Modest private pension +
Modest nest egg, 60/40 indexed +
My good looks and sparkling conversation
bada bing is online now   Reply With Quote
Old 12-11-2018, 06:37 PM   #4
Recycles dryer sheets
 
Join Date: May 2015
Posts: 444
Quote:
Originally Posted by bada bing View Post
My 401K is with Fidelity and I do mega-Roth conversions 3-4 times per year. I have 2 IRA accounts set up at Fidelity to use - a tIRA account is where I send the earnings and a Roth is where I send the basis. By sending the earnings to a tIRA, the taxes are deferred until withdrawal. The Fidelity reps I've talked to have all been knowledgeable about the conversion and can do it on line, but it does require a phone call.

You don't have to convert the after-tax earnings to Roth and pay taxes now. You have the option to put them in a tIRA to defer taxes. At least my 401K at Fidelity allows it.
I've done this '2014-54' several times as well exactly as you have described (2 accts). I have always had to take to Fidelity on the phone to do it.

eroscott is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Mega Roth from 401(k) for solo LLC? johnhkc FIRE and Money 0 08-21-2017 09:15 PM
Cost basis method question, or take money from my Roth? Retch The Grate FIRE and Money 9 08-01-2016 12:46 PM
Mega Roth Conversions? FIREmenow FIRE and Money 3 06-07-2016 10:09 PM
Can I do both Backdoor Roth IRA and Mega Backdoor Roth IRA? growerVon FIRE and Money 8 07-30-2015 02:04 AM
Question on tax basis and capital gains on stock sale gettingthere FIRE and Money 15 02-09-2008 10:04 AM

» Quick Links

 
All times are GMT -6. The time now is 04:14 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2019, vBulletin Solutions, Inc.
×