Timeline for Pre-tax 401k and post-tax Roth 401k contributions commingled into same account? Tax treatment of withdrawals?
Current License: CC BY-SA 3.0
15 events
| when toggle format | what | by | license | comment | |
|---|---|---|---|---|---|
| Jan 17, 2013 at 14:55 | vote | accept | Jay | ||
| Jan 17, 2013 at 14:07 | comment | added | Chris W. Rea | @littleadv Joe's right on the match. Always pre-tax. See money.stackexchange.com/questions/1598/… | |
| Jan 17, 2013 at 3:47 | comment | added | JTP - Apologise to Monica♦ | Nope, the match goes into the traditional side regardless of which account employee was depositing to. Now, the latest rules springing from the cliff, included the ability to convert from Trad 401(k) to Roth, so if you wish to convert on a regular basis, that's fine, just brace for the tax bill or account for it in regular withholdings. | |
| Jan 17, 2013 at 3:38 | comment | added | littleadv | @joe match doesn't go to Roth as well? I would expect so (taxed when matched...) | |
| Jan 17, 2013 at 3:34 | comment | added | JTP - Apologise to Monica♦ | I am still searching to find whether such a setup is proper, but it occurs to me, the record keeping in a commingled arrangement is probably far more complex. Consider, a roth deposit needs to have its match, if any go to the traditional side. So the proportion of each account is constantly changing. | |
| Jan 16, 2013 at 23:14 | comment | added | littleadv | @Dilip I believe that would be up to the plan. | |
| Jan 16, 2013 at 23:11 | comment | added | Dilip Sarwate | @littleadv So I guess the next question should be if a rollover of only the Roth portion can be done (leaving the traditional 401k safer from creditors if that is an issue) or is all money leaving the 401k apportioned amongst the Traditional and Roth portions regardless of whether it is a distribution or a rollover? At least one plan that I know of allowed separate rollovers of the different parts. | |
| Jan 16, 2013 at 23:04 | comment | added | littleadv | @Dilip yes, that is my conclusion. 401k has some benefits (for example, better protected against creditors), but when you reach the age you have to consider the rollover (if you have a Roth portion). | |
| Jan 16, 2013 at 22:59 | comment | added | Dilip Sarwate | @littleadv Thanks for the link where I learned something I didn't know before. So unless the employment is continuing past age 70.5 or something else prevents it, it seems that it would be best to roll over the Traditional and Roth portions of the 401k into Traditional and Roth IRAs respectively and thus gain more flexibility. | |
| Jan 16, 2013 at 22:54 | comment | added | littleadv | @Dilip, RMD rules for 401k are regardless of whether its Roth or not. See the FAQ on irs.gov: irs.gov/Retirement-Plans/… | |
| Jan 16, 2013 at 22:24 | comment | added | Dilip Sarwate | So, when a (qualified) distribution occurs, it has to come in part from the post-tax Roth 410k portion and in part from the pre-tax 401k portion? That is, the 401k rules differ from IRA rules in that it is not necessary to ever take a distribution from a Roth IRA if one does not choose to do so whereas Traditional IRAs are subject to RMD rules, and if the Traditional IRA has a basis, that is distributed proportionally, and is tax-free? | |
| Jan 16, 2013 at 20:33 | comment | added | Jay | If I can rollover the balance to a Roth IRA and Traditional IRA after leaving the company, that might be the answer for being able to control withdrawal taxes more closely as I expected (the investments choices don't bother me much, i would probably allocate them similarly anyway; i've found allocating differently in my IRA accounts didn't gain me much, because I can't predict the market very well! :) | |
| Jan 16, 2013 at 19:02 | comment | added | littleadv | If they're tracking the growth separately then its not a problem at all. You can roll the 401k potion over to a Roth IRA when you leave, and separate them. I'm more bothered by @joe's point - different investment choices. | |
| Jan 16, 2013 at 18:51 | comment | added | Jay | This seems wrong... I have several years of growth attributed only to pre-tax $, and none for Roth, which is why it feels wrong. They do break out the "Balance" for pre and post tax on the statement, so it seems they are tracking the growth separately. | |
| Jan 16, 2013 at 18:24 | history | answered | littleadv | CC BY-SA 3.0 |