Rolled my after-tax 401K into a Traditinal IRA :(

Hi,

some years ago I rolled my 401K into my IRA, Traditional IRA.  I had some after-tax allotments in the 401K which apparently disappeared because Traditional IRA's only deal with pre-tax.  According to my brokerage I should have rolled the 401K into a Roth IRA instead, which does allow for after-tax contributions.

My fault, I didn't pay too much attention to the IRA at the brokerage because I was not going to make anymore contributions & planned on liquidating it at age 60.

I have 401K statements from Fidelity that clearly show the pre-tax vs. after-tax contributions.  Is there anyway I can resurrect those lost after-tax contributions to my 401K - that now reside in my Traditional IRA?

 

Thank you

Retirement tax questions

Yes.   Your after-tax 401(k) contributions becomes a "basis" in the Traditional IRA.    If you had  no other after-tax basis in the IRA then the first time you take a distribution from the IRA then answer the 1099-R interview questions that yes, you tracked the after-tax basis in the IRA and then enter the amount of prior basis from your records.   Enter the explanation that it is basis form a rollover 402(k) and it will be applied to reduce the tax on the distribution.

 

You can NEVER withdraw ONLY the nondeductible part - it must be prorated over the entire value of ALL Traditional IRA accounts which include SEP and SIMPLE IRA's. (For tax purposes you only have ONE Traditional IRA which can be split between as many different accounts as you want, but for tax purposes they are all added together).

For example using rough figures: if you had $60K of nondeductible contributions in an IRA with a total value of $600K (10:1 ratio), then when you take a $60K distribution from any IRA account $6,000 would be nontaxable and $54,000 would be taxable (same 10:1 ratio) , with the remaining $54K of basis staying in the IRA for future distributions. As long as there is any money in the IRA, there will be some basis.

TurboTax will ask for your non-deductible "basis" and then the *Total Value* of *all* Traditional IRA, SEP and SIMPLE accounts as of Dec 31, of the tax year. That is so the prorating of the basis can be properly proportioned between the current years distribution and the remaining IRA value. That is done on the 8606 form.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

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Retirement tax questions

I had come across the IRS doc Rollovers of After-Tax Contributions in Retirement Plans but your explanation is so much better.  Thank you for the detail, esp. the 1099-R info 🙂