Transferring 401K to brokerage account, and a question

[swampwiz]

OK, I finally did it. I will be transferring my 401K (from a previous employer) over to a brokerage account. Because of the paperwork BS, I will be out of the market for at least a week. Let's hope for a big market swoon the next week or two.

My questions concern the fact that a small part of this 401K is after-tax contributions (i.e., basically a "Roth" 401K.) On my tax form, would I need to consider this as a qualified Roth distribution? (It has been more than 5 years since I had separated from the employer, so that would not be an issue.) Can I roll it over to a Roth IRA? The distribution will come to me directly as regular check that that I can do with as I please. (The tax-deferred part will be a check made out to the new traditional IRA custodian.)

 

[sailfish]

I would suggest asking this question in the "Fairmark tax forum at the website below. Top tax accountants answer involved questions like yours.

Fairmark Forum :: Retirement Savings and Benefits

 

[scrabbler1]

Swampwiz, I had the same thing when I left my company in 2008. I had a 401(k) there which included some after-tax contributions, known at the time as a 401(a).

What I did was to have the after-tax contribution amount (i.e. its principal) given to me directly while everything else (i.e. my pretax contributions and ALL the earnings on both the pretax contributions and after-tax contributions) included in a check made out to the brokerage house as a direct rollover (which appears to be what you want to do). The after-tax contribution amount was shown in Box 5 of Form 1099-R. Be on the lookout for that.

I needed the after-tax contributions for other purposes, so I did not create an IRA of any type with it. When it came time to do my 2008 taxes one year ago, I attached a statement describing these two amounts because the total of them is what I included in Line 15a on Form 1040. Line 15b would have a zero as the taxable amount because neither one is taxable. [I actually had additional types of distributions from my company savings plan which had different tax treatments, but that is irrelevant to you.]

 

[travelover]

I did a Roth conversion of my after tax money in my 401(k). It appears that this is a very gray area, however, as explained in this Fairmark article.

Isolating 401k Basis for a Conversion