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Omar80
Level 3

Roth 401K to Roth IRA rollover

I have made after-tax contributions in my workplace 401K program which I have set up to automatically transfer into a Roth 401K account in Fidelity.  I have the option of rollign over those Roth 401K funds into an IRA.  I was told first the securities have to be liquidated in the Roth 401K, then the money can be rolled over into a Roth IRA.  In my case I was planning to open a Roth IRA in Fidelity, so I wouldn't be receiving a check from Fidelity with the balance but rather they'd transfer the funds between those accounts.

 

Is there any income restriction to perform such a rollover, or any tax consequence the year of the rollover?  I'm not eligible to directly contribute to a Roth IRA.  I'm aware of the back-door Roth IRA contributions that aren't income restricted, but what I had heard about was pre-tax IRA rollovers to Roth where taxes are due for that conversion.

 

I just want to avoid any surprises, so would much appreciate it if anyone has done this and can comment to enlighten me and anyone else considering this.

4 Replies
macuser_22
Level 15

Roth 401K to Roth IRA rollover

A rollover/conversion of  after-tax 401(k) money to a Roth IRA is tax free.  Have the 401(k) trustee do a direct rollover to the Roth IRA which should be reported to you with a 1099-R with a code G [typo corrected] in box 7 and the taxable amount in box 2a.   The after-tax contributions should be shown in box 5 and if that is the same amount as the total rollover shown in box 1 then  box 2a should  be zero.

**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.**
Omar80
Level 3

Roth 401K to Roth IRA rollover

Do you know if a rollover to a Roth IRA is subject to income restrictions?  The direct contributions is clearly, but I couldn't tell for certain about rollovers.

macuser_22
Level 15

Roth 401K to Roth IRA rollover


@Omar80 wrote:

Do you know if a rollover to a Roth IRA is subject to income restrictions?  The direct contributions is clearly, but I couldn't tell for certain about rollovers.


A rollover is not a new contribution so there are no restrictions - you are simply transferring money from one tax deferred retirement account to another.

**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.**
macuser_22
Level 15

Roth 401K to Roth IRA rollover


@macuser_22 wrote:

@Omar80 wrote:

Do you know if a rollover to a Roth IRA is subject to income restrictions?  The direct contributions is clearly, but I couldn't tell for certain about rollovers.


A rollover is not a new contribution so there are no restrictions - you are simply transferring money from one tax deferred retirement account to another.


The only restriction is, if you do not have the trustee do a direct rollover and just take a distribution yourself in cash and roll it over yourself then the rollover must be completed within 60 days from the date of the distribution.   That time limit does not apply to direct rollovers.

**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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