"after tax" 401k question

[InsultComicDog]

I was downsized from my previous employer in January and am now dealing with my 401k.

 

My 401k has a before-tax portion which I am transferring, entirely, to a traditional IRA.

 

There is also a few thousand dollars in an after-tax portion of the 401k; i.e. where taxes have already been withheld.

 

Question: can that be transferred to a Roth IRA?

[Kevin20]

I was downsized from my previous employer in January and am now dealing with my 401k.

 

My 401k has a before-tax portion which I am transferring, entirely, to a traditional IRA.

 

There is also a few thousand dollars in an after-tax portion of the 401k; i.e. where taxes have already been withheld.

 

Question: can that be transferred to a Roth IRA?

 

 

Someone put too much money into their 401(k).

 

You may or may not have a hassle trying to directly roll that over into a Roth. That's an unusual circumstance most people aren't used to dealing with. However, why bother? Just take the cash distribution by check (it's after-tax money, no penalty or tax), and then open a Roth to put that money into. In fact that would probably be a lot faster.

 

Here's another tip. If your unemployment results in you having little taxable income for 2008, then during the year you may want to convert all or a portion of your new rollover traditional IRA into a Roth to take advantage of your regrettably low tax bracket.

Edited April 18, 2008 by Kevin20

[TaxProz]

As of 1/1/08 it is now possible to roll over after-tax contributions directly to a Roth IRA. Keep in mind only the original after-tax contribution can be rolled and any gains are taxable and should be rolled into a traditional IRA to avoid taxes and possible penalties.