401k rollovers (pre & post tax contributions)

Question

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.

Answer 1

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.