Do you have any after-tax money in your 401k? If not, then I don't think there's any cost basis to speak of since when you withdraw. Tax deferred accounts such as traditional IRA and 401k are generally taxed as ordinary income. If you have post-tax contributions in the account, then that's your basis although I'm not exactly sure if you can choose which you want to withdraw (pre-tax or post-tax) or if distributions are pro-rated based on your contributions.Since quitting back in early September, I've been assessed $5 every quarter, which I expected. But in looking at the transactions, I see that they redeem partial shares in order to withdraw the fees from my account.
I'm wondering if these transactions will have tax consequences for me at some point? I'm not receiving the proceeds of the redemptions but would the IRS consider these transactions as "illegal" redemptions since I'm years away from being able to withdraw from my 401k?
Also I'm getting dividends every month which are being re-invested. Do I need to worry about tracking cost basis for when I do redeem the shares? Hopefully Schwab is keeping a running tally of the cost basis but we're talking 25 years by the time I start redeeming shares.
I'm wondering if these transactions will have tax consequences for me at some point? I'm not receiving the proceeds of the redemptions but would the IRS consider these transactions as "illegal" redemptions since I'm years away from being able to withdraw from my 401k?
I believe that these transaction fees are not distributions and thus not taxable. This was the case when my fidelity 401k charged me a fee to express a check to me but the check fee, taken from shares, was not taxable. I asked about this when the transaction was being setup (answer was not taxable) and confirmed that it did not show up on the 1099-R for that year.
-gauss
It's all pre-tax money.
Ok, makes sense, dividends reinvested will be taxed as ordinary income.
Check your 401k rules for non-spouse beneficiaries. Spouse to spouse allows for "stretch" ira benefits, non-spouse beneficiaries usually not. Usually the non-spouse beneficiary must take a one time payment within five years of death, in which the 401k would be decimated by income taxes.
I know only the spouse can rollover to their own IRA/401k but does your plan not even allow rollovers to an inherited IRA?Check the rules of your 401k, mine does not allow my kids to roll it over into an ira. It is a BIG tax situation. I have to either have to 1) not die 2) die before my wife 3) roll a large portion into an ira. I have to leave some in my 401k so I can receive distributions before I am 59 1/2. My 401k allows distributions after a break in service after 55 with no 10% penalty.
Check the rules of your 401k, mine does not allow my kids to roll it over into an ira. It is a BIG tax situation. I have to either have to 1) not die 2) die before my wife 3) roll a large portion into an ira. I have to leave some in my 401k so I can receive distributions before I am 59 1/2. My 401k allows distributions after a break in service after 55 with no 10% penalty.
I know only the spouse can rollover to their own IRA/401k but does your plan not even allow rollovers to an inherited IRA?
Technically, a full lump sum rollover to an inherited IRA satisfies that requirement.No. It is not stated as such.
"A beneficiary (other than a surviving spouse) must take the money in a single payment within five 5 years after your death. "
I am awaiting further clarifications; IRS rules allow a distribution to a stretch ira, plan wording is quoted above however vague. Many estate planning books/research suggest that I rollover to ensure the stretch ira, my attorney wants to see my written plan to make a final determination.
DW's plan only allows withdrawals 90 days apart. Not something I was expecting. I guess this is something everyone needs to look at.