401K and Roth 401K in same account--issues?

[RunningBum]

My son showed me his retirement account through his job. He contributes to both a 401K and a Roth 401K. I think he gets both matched up to 3%--can't do more than 3% in either account, so it makes sense to have both.

Both contributions go into the same account, which I find odd because one is pre-tax and the other is post-tax. Is this going to cause issues down the line? From what I've read, if he keeps them in that account until distribution, at that point anything he takes out would be split at the ratio they are in the account or perhaps were contributed. For him it's 50/50 either way right now.

That's not ideal, but can he separate them into a tIRA and a Roth IRA in a rollover? His account info does show the split of pre/post tax so the info is there if it's allowed.

I never did a Roth 401K so I have no experience with them and was confused when I saw them in the same account.

 

[Onward]

Strange that they are kept in one account. Talk about a recipe for complexity down the road.

 

[bw5972]

My son showed me his retirement account through his job. He contributes to both a 401K and a Roth 401K. I think he gets both matched up to 3%--can't do more than 3% in either account, so it makes sense to have both.

Both contributions go into the same account, which I find odd because one is pre-tax and the other is post-tax. Is this going to cause issues down the line? From what I've read, if he keeps them in that account until distribution, at that point anything he takes out would be split at the ratio they are in the account or perhaps were contributed. For him it's 50/50 either way right now.

That's not ideal, but can he separate them into a tIRA and a Roth IRA in a rollover? His account info does show the split of pre/post tax so the info is there if it's allowed.

I never did a Roth 401K so I have no experience with them and was confused when I saw them in the same account.

I believe any match by the company MUST go into the tIRA regardless if is based on a Roth contribution or not.

 

[RunningBum]

I believe any match by the company MUST go into the tIRA regardless if is based on a Roth contribution or not.

I'll recheck that when I see him again. I remember he asked me about it when he was first eligible for it. I would've suggested just adding to his Roth IRA at VG over a Roth 401K if there was no match, but it's possible the match is going to the tIRA. I didn't check the current balances closely to know for sure, just that his contributions were the same and both in that same account.

 

[FlaGator]

My former employer offered both and I contributed to the Roth 401k once it was offered. Their match went into my regular 401k.

Though may they appear as "one account" on the statement, I'd bet they are accounted for separately and there won't be an issue if/when he separates from the company and wants to do something different with the money.

 

[Sunset]

I have my own self employment 401K and later added a Roth 401K.
Both show up on the same login, but they do each show as separate totals, and each with their own contribution history.
Maybe how it's presented is what is confusing ?

 

[meierlde]

You need to look at the statements in detail. My 401k (all regular) even broke out sources of the funding and did note the post tax amounts that were include (not roth since it was not available while I was working at the company) But somewhere on the statement there will be categories and amounts in these various categories. (Which might not show up on the summary)

 

[Huston55]

My son showed me his retirement account through his job. He contributes to both a 401K and a Roth 401K. I think he gets both matched up to 3%--can't do more than 3% in either account, so it makes sense to have both.

Both contributions go into the same account, which I find odd because one is pre-tax and the other is post-tax. Is this going to cause issues down the line? From what I've read, if he keeps them in that account until distribution, at that point anything he takes out would be split at the ratio they are in the account or perhaps were contributed. For him it's 50/50 either way right now.

That's not ideal, but can he separate them into a tIRA and a Roth IRA in a rollover? His account info does show the split of pre/post tax so the info is there if it's allowed.

I never did a Roth 401K so I have no experience with them and was confused when I saw them in the same account.

Yes. They will be accounted for separately in his 401k, and he will be able to roll over the Roth 401k (and any earnings) into a Roth IRA, as a non-taxable event, if he chooses to do so. Been there done that, and the originating 401k plan administrators will be able to give him the guidance he needs when the time comes.

Note that he will also be able to roll over any additional ‘after tax’ 401k contributions to a Roth IRA if he so chooses at a later date; separate rules though.

My former employer offered both and I contributed to the Roth 401k once it was offered. Their match went into my regular 401k.

Though may they appear as "one account" on the statement, I'd bet they are accounted for separately and there won't be an issue if/when he separates from the company and wants to do something different with the money.

+1

And, they are accounted for separately.

The only thing I’d add to this is that your son should read the ‘401k Plan Description’ in detail; there can be quite a bit of difference from plan to plan. But, the ability to roll “Roth” to “Roth” will exist regardless of his ‘Plan Description.’

 

[atmsmshr]

After reading about the 5 year clock for Roth accounts on this forum, I started a small Roth inside my 401k this year just to get the clock ticking. Fidelity shows this Roth as a separate lines item - with all of the company match going to the tax deferred section.

 

[bingybear]

I had both at one employer and contributed to both. Both accounts were under the same login, but were clearly separate accounts to me. I would be surprised if they are not held is separate accounts. They may be under the same login and have some consolidated reporting.

 

[LOL!]

After reading about the 5 year clock for Roth accounts on this forum, I started a small Roth inside my 401k this year just to get the clock ticking. Fidelity shows this Roth as a separate lines item - with all of the company match going to the tax deferred section.

I wonder if your 5-year Roth clock was started by a Roth 401(k). I thought one need a Roth IRA to start that clock.

 

[bada bing]

After reading about the 5 year clock for Roth accounts on this forum, I started a small Roth inside my 401k this year just to get the clock ticking. Fidelity shows this Roth as a separate lines item - with all of the company match going to the tax deferred section.

There are separate "clocks" or waiting periods for Roth 401Ks and for Roth IRAs. There is a 5 year clock started for each separate 401K and one for all
IRAs in aggregate. Doesn't make sense, but them's the rules.
https://www.kitces.com/blog/underst...s-for-roth-ira-contributions-and-conversions/

 

[RunningBum]

Yes. They will be accounted for separately in his 401k, and he will be able to roll over the Roth 401k (and any earnings) into a Roth IRA, as a non-taxable event, if he chooses to do so. Been there done that, and the originating 401k plan administrators will be able to give him the guidance he needs when the time comes.

Note that he will also be able to roll over any additional ‘after tax’ 401k contributions to a Roth IRA if he so chooses at a later date; separate rules though.

OK, thanks, that's reassuring.

I'm 98% sure they are in the same account. He's got both sides invested in the same S&P 500 index fund. The first thing I saw was the whole amount in that one fund. It would seem very unusual for them to display separate accounts with the same fund as a single entry.

 

[Huston55]

OK, thanks, that's reassuring.

I'm 98% sure they are in the same account. He's got both sides invested in the same S&P 500 index fund. The first thing I saw was the whole amount in that one fund. It would seem very unusual for them to display separate accounts with the same fund as a single entry.

Yea, the multi-account/multi-source thing can make reading one’s 401k statement a chore. But, one view of mine also shows all sources that are in the same fund (i.e.: S&P500, US Bonds, etc.) as a single amount; other statement views show the contribution “by source”, which is what your son’s interested in if he plans transfers to IRAs at a later date. For example, that “by source” view of my old 401k shows balances categorized like this:

-Employee Pre-Tax Contributions
-Employer Match
-Employer Profit Sharing Contributions
-Roth 401k
-Post 86 After-Tax Contributions*

*Certain 401k plans allow continued contributions beyond set annual levels (which ours did), which results in this pot of funds. Depending on the 401k’s Plan Description, these ‘contributions’ can be transferred to a Roth IRA; the associated earnings must be transferred to a TIRA; both are non-taxable events. Here’s a link explaining that.

https://money.stackexchange.com/questions/37166/roll-over-post-1986-401k-to-roth-ira

 

[NgineER]

My after tax 401k contributions show up as being in the same account as the tax deferred. I can choose the after tax contributions to go to a separate fund, but when I don’t and the funds are invest in the same funds, there is no breakout between tax deferred and after tax. The contributions and earnings for the aftertax can be withdrawn to a Roth IRA, but taxes has to be paid for any earnings.

Just because it is not broken out in separate accounts don’t mean anything IMO. I’m sure the plan documents spell it out.

 

[Huston55]

My after tax 401k contributions show up as being in the same account as the tax deferred. I can choose the after tax contributions to go to a separate fund, but when I don’t and the funds are invest in the same funds, there is no breakout between tax deferred and after tax. The contributions and earnings for the aftertax can be withdrawn to a Roth IRA, but taxes has to be paid for any earnings.

Just because it is not broken out in separate accounts don’t mean anything IMO. I’m sure the plan documents spell it out.

Not exactly.

The after-tax ‘contributions’ can be transferred to a Roth IRA, and are completely tax free. The after-tax ‘earnings’ must be transferred to a TIRA, which is a non-taxable event; tax on the TIRA ‘earnings’ is taxable only upon withdrawal.

 

[NgineER]

When I have had earnings in my aftertax portion of the account. I have the option to pay taxes on it or leave it in the account.

 

[Swordplay Charlie]

I believe any match by the company MUST go into the tIRA regardless if is based on a Roth contribution or not.

I know the match from the money I put into my Roth 401(k) goes into the traditional portion of my 401(k).

 

[meierlde]

OK, thanks, that's reassuring.

I'm 98% sure they are in the same account. He's got both sides invested in the same S&P 500 index fund. The first thing I saw was the whole amount in that one fund. It would seem very unusual for them to display separate accounts with the same fund as a single entry.

That is how Vanguard did it with the various sources of funds for example Before Tax Basic, Before Tax Supplemental, company matched leveraged, after tax supplemental etc.

 

[jazz4cash]

I also contributed to both Roth and trad 401k with matching funds going automatically to traditional. It gets a bit messy when exchanging funds and taking distributions but Fido is pretty good about distinguishing between the two. Although the funds appear to be intermixed, there is a specific view that identifies the "source" as others have indicated. Funds coming out of the Roth can go to Roth IRA.

 

[FrugalLady]

I too contributed to both a 401k and a Roth 401K with my prior employer. When I view my account online, both contribution types are lumped together in one total, and I've been unable to find a source breakdown online (although I may have just missed it). However, my quarterly statement always contains a breakdown of each source: 401K Deferral, Employer Match and Roth Deferral.

 

[sengsational]

Aon Hewitt holds my former 401k/Roth 401k in the "same account".

The web site doesn't provide a way to look at the breakdown, but the quarterly statement provides the breakdown that totals up to the grand total. But the web site does not provide a breakdown by position. So I can see what percent is in each as a whole, but not the dollars or shares in each kind.

They do provide a download function on the web site that shows the detailed transactions. It supplies the details for each position, but I'd need to add every transaction since "day one" to come up with my own totals. Of course, being the detail geek I am, I've done it. It came up almost to the penny.

One thing that could be explored for the OP is, if there is a periodic fee, then one instance of the fee extraction could be examined. There may be separate transactions for each "flavor" of balance. This is the case with my account.

In my case, I have NINE flavors of balance!

All these balances are the result of having not only money from a former employee rolled-in, but also a company buyout.

• Rollover
• Roth Rollover
• Before Tax (401k)
• Old Company Match
• Old Company Automatic
• Stock Plan
• Roth 401k
• New Company Automatic
• After Tax

"Rollover" and "Before Tax (401k)" make up over 80%, and throw in the company match and we're up to 92%, so not really much in those other buckets.


I tried to pull out the after tax, just to simplify slightly, but I transferred some money to a brokerage account, and in order to withdraw all of the money in that "flavor", I'd need to move all the brokerage funds back to the regular account in order to then tidy-up. I'm not willing to do that at the moment.

 

[atmsmshr]

There are separate "clocks" or waiting periods for Roth 401Ks and for Roth IRAs. There is a 5 year clock started for each separate 401K and one for all
IRAs in aggregate. Doesn't make sense, but them's the rules.
https://www.kitces.com/blog/underst...s-for-roth-ira-contributions-and-conversions/

Many thanks for identifying this requirement!

 

[Cat-tirement]

Aon Hewitt holds my former 401k/Roth 401k in the "same account".

The web site doesn't provide a way to look at the breakdown, but the quarterly statement provides the breakdown that totals up to the grand total. But the web site does not provide a breakdown by position. So I can see what percent is in each as a whole, but not the dollars or shares in each kind.

They do provide a download function on the web site that shows the detailed transactions. It supplies the details for each position, but I'd need to add every transaction since "day one" to come up with my own totals. Of course, being the detail geek I am, I've done it. It came up almost to the penny.

One thing that could be explored for the OP is, if there is a periodic fee, then one instance of the fee extraction could be examined. There may be separate transactions for each "flavor" of balance. This is the case with my account.

In my case, I have NINE flavors of balance!

They manage my 401k for my former megacorp too, and not surprisingly my setup was pretty similar. I didn't have that many flavors, but still got increasingly frustrated at the lack of separation in reporting, though I didn't do the brute force from day one calc that you did. A couple of years after retiring, they did allow my to roll out the Roth portion to an outside Roth, which left me with just the tax deferred money in the 401k. Much simpler to track now.

 

[sengsational]

^ Good idea about pulling out the Roth. I called about pulling out the Roth and they said it would be taxable unless I waited for the 5 year clock to tick over. That process would require me pulling all the funds back from the separate brokerage account, but I might do that when the time comes, to simplify.