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I have a 401k from a former employer. This contains both pre & post tax contributions. Do I need to open both a Traditional IRA and a Roth IRA so the distributions are rolled over correctly? It seems possible to open a traditional IRA and rollover everything into that but I would need to keep track. No way I can keep track for 25 or more years.

Thanks.

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    Are you talking about "Post-tax" 401k or "Roth" 401k? These are different things entirely. – littleadv Jun 5 '14 at 1:44
  • Sorry, it is a Roth 401k. I have one 401k still with my old employer but it contains Roth contributions and regular pretax contributions with employer contributions. It's all together but they gave me balance under each one. Thanks. – user16372 Jun 5 '14 at 2:42
  • I updated my answer. – littleadv Jun 5 '14 at 3:07
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Pre and Post tax regular contributions both go to Traditional IRA. "Post tax" contribution is not a Roth contribution. It is akin to a non-deductible Traditional IRA contribution. Roth 401k can only be transferred to a "Roth" designated account (another Roth 401k or a Roth IRA). Employer matching is always pre-tax regular contribution.

If you have a post-tax portion which is not Roth, then what you can do is to roll over the non-deductible (post-tax) part to a Roth IRA immediately. Keep in mind that there may be some issues with taxes when you do this if you already have post-tax IRA balance. See my article on the Roth IRA loophole.

You should check with your IRA and 401k providers if you can roll over directly from post-tax 401k to Roth IRA to avoid these issues.

Your Traditional (pre-tax together with post-tax/non-deductible, if you have any) and Roth balances must always be tracked separately. So you must open a Traditional IRA and a Roth IRA. You cannot combine these balances.

  • Since the OP included the roth-401k tag, I wonder if he meant Roth 401k when he said "post-tax contributions" – Dilip Sarwate Jun 5 '14 at 1:38

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