Quote:
Originally Posted by devans0
I wonder what happens to the tax basis if there is a loss in a downturn? There is the risk of being out of the market on a rebound and a reward of rollover to a tax free Roth future at reduced costs.
|
Not quite sure what the question is so I'll just say what happened in my situation.
I did a rollover from a 401k to an IRA. There was a very small tax basis in the 401k as almost all the money had been contributed pre-tax. On the day of the distribution my 401k provider issued a check equal to the last valuation of the investments. That check was sent to me via UPS and same day I sent it via UPS to VG. Lost a couple of days of market movements but the money in the new IRA had exactly the same cost basis as it had in the 401k.
i.e. in 1991 when I joined the company they had an after-tax savings plan and in that year I contributed ~$1,000 after tax money. The company converted the savings plan into a 401k at the end of 1991. No matter how much the market has risen and fallen that $1,000 cost basis didn't change and when it rolled over to an IRA, the accompanying 1099-R to myself and VG showed a cost basis of $1,000.
I hope this helps. This was a total rollover, I expect partials will include the appropriate fraction of the cost basis be transferred, just as partial conversions to ROTH IRAs take an appropriate fraction of the cost basis.