Lump Sum Question

[Ron P.]

I've finally reached the age (58) to receive my Lump Sum payout from a defined pension plan. ( Decision has been made to take the lump sum instead of annuity payout).
Here is the question, the after tax contributions made to the plan over the years are about 10% of the total lump sum pay out - $50k vs $500k), Can the $50K be rolled over to my rollover IRA too? and if so how do I account for this amount vs. my pretax amount during my withdrawl years. Would I be better to take the after tax contributions in a seperate payment to keep future record keeping simplier? Thanks Ron

 

[charlie]

Hi Ron. Sorry about the late response ...... I hope
you are still lurking.

IMHO, you should take the after tax amount as a
separate payment. I can't think of a good reason
you would want to include the after tax portion
in your IRA roll-over as it will be taxed again at
withdrawal. Is the after tax part eligible for a
ROTH IRA? If so, put it there.

Cheers,

Charlie

 

[Nords]

Separate accounts.

My father-in-law is in a similar situation with a variety of before-tax and after-tax 401(k) contributions.

Unfortunately his lump-sum pension and his 401(k) were rolled over into an IRA that already held deductible and non-deductible contributions.

This year is his first RMD and it's been pretty much a mathematical nightmare. My brother-in-law the CPA is getting mightily tired of chasing down all the years of contributions & their gains.

If your IRA custodian has any sympathy for customers, they'll allow you to set up separate accounts for each flavor of contribution. Another way would be to put each type of contribution in their own separate mutual funds/ETFs/stock portfolios.

If not, you'll need to keep careful track of the cost basis of each and ratio out the investment gains. And you'll have to do the same tracking if you roll the funds over to a Roth.

I have an $1700 pre-tax TSP account that I rolled over into my conventional IRA without realizing the impact of that "decision". Now that I'm converting the six-figure IRA to a Roth I'm wondering if it's even worth tracking down that small contribution. No doubt the IRS will tell me if I care...

 

[John Galt]

Commingling all that taxed vs. untaxed money is a
another bullet I managed to dodge.

JG