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Old 05-12-2015, 03:29 PM   #21
Thinks s/he gets paid by the post
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Join Date: Aug 2011
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Originally Posted by hnzw_rui View Post
Question, if you have both pre-tax and post-tax money in your regular 401k, doesn't the conversion amount get pro-rated between the pre- and post-tax balance when you do a rollover to a Roth IRA?
Fortunately this is not the case with our plan. Pre-tax amounts are not allowed to be withdrawn before age 59 1/2 or termination from the company.

The after-tax amounts are available for withdrawal at anytime, however there is a pro-rata amount of the the taxable earnings that must be taken at the same time.

Both amounts (taxable and after tax) are accounted for separately and shown on the quarterly statements. The company also added a third option - Roth 401k but that is not what I am talking about here.

Within the time limit (60 days if memory serves), I rollover the full amount to my Roth IRA with careful attention to the paperwork that I submit. In general I need to have funds available to makeup for any withholding that occurred in the check (ie 20% of the taxable amount).

I receive a 1099-R from the employer 401k that shows the full amount of the distribution and the taxable amount based on the amount of earnings included in the withdrawal.

The Roth IRA will then issue in June a 5498 showing the amount of the rollover contribution.

If people are doing this the first time, I suggest that they do a small amount at first (ie a few thousand dollars) so that if anything is done not quite right, the amount of the error will be small.

BTW- Technically I don't think this is referred to as a conversion.

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