- In tax year t, I contribute 10000 to a Roth 401k and 10000 to an after tax 401k.
- By tax year t+1, both amounts have grown by 10000 to 20000.
- In tax year t+1, I convert the full 20000 from the after-tax 401k to the Roth 401k, paying applicable taxes on the 10000 earnings.
- In tax year t+2 I rollover the entire 40000 into a Roth IRA.
Does the 5 year rule apply on the After-tax 401k -> Roth 401k -> Roth IRA conversion of the 20000 (including 10000 earnings that was originally pre-tax)?
- If so, what is the 5 year period? (5 years from Jan 1 of original conversion tax year?)
How does this affect Roth IRA withdrawal ordering rules with respect to the taxable portion of a single conversion being withdrawn before the non-taxable portion?
- The entire 40000 rollover was non-taxable, post-tax money coming into the Roth IRA, but is the nature of the taxable after-tax 401k earnings -> Roth 401k conversion retained?
- How does this affect taxes + penalties on withdrawals from the Roth IRA?
Assume that in-plan conversions and rollover from Roth 401k are permitted by the employer plan rules.