I am trying to get a better understanding of After Tax 401K contribution and IRA Rollover. Let's say I invest an additional $10,000 annually into my 401K After Tax and roll this into an IRA. It's my understanding that I would roll over the contribution into a Roth IRA and the earnings into a traditional IRA. What are the short term and long term tax implications of this scenario?
Yes, you can rollover the after-tax money to a Roth IRA and before-tax money to a Traditional IRA. Rollovers have no tax whatsoever. When you take the money out of the Traditional IRA then that is taxed as ordinary income. You can always withdraw your own contributions from a Roth IRA but the earnings can be subject to a 10% penalty if removed before you reach the age of 59 1/2 or within 5-years from date of the rollover.