![]() In that case, you may want to roll out only the after-tax source balances directly into a Roth IRA. If you have both pre-tax and after-tax contributions, you may be able to take a partial distribution from your retirement plan, consisting of just one or the other, if the plan separately tracks the sources of all of your contributions. In general, to roll after-tax money to a Roth IRA, earnings on the after-tax balance must, in most cases, also be withdrawn. In-service withdrawals come with some potentially complicated rules so it’s important to understand the rules the IRS has and those of your retirement plan. There is a big catch though: Not all plans allow withdrawals while you’re still with the company and your retirement plan may have some rules around the requirements for rolling out of the plan. ![]() You can roll over after-tax contributions to a Roth IRA, and it is possible to do that before age 59½. IRA rollover without an in-plan conversion The options available to you will depend on your situation.ġ. If your employer does not offer a Roth option or the in-plan Roth conversion feature, you can still roll over your after-tax contributions to a Roth IRA. Not all employers offer a Roth option in their retirement plan-or they may not offer the option to do an in-plan conversion. So if you converted in December, the aging requirement might, in practice, be only a bit more than 4 years. The 5-year clock starts on January 1 of the tax year in which the conversion occurred, or the contribution was made, no matter when during the year it actually happened. Satisfying the 5-year aging requirement means that there are at least 5 years between either the year of your first Roth contribution or the year the conversion took place and any withdrawals. So no taxes would be due on withdrawals-as long as they take place after age 59½ and the 5-year aging requirement has been met. That strategy is covered more below.Įarnings in a Roth account grow and may potentially be distributed tax-free as long as certain conditions are met. So you may want to roll those earnings to a traditional IRA instead. But, converting the earnings associated with those contributions to the Roth option in your workplace savings plan or a Roth IRA would be a taxable event. When you convert after-tax balances to Roth, no taxes would be due on the conversion of your contributions. There are a couple of different ways to accomplish that, including rolling over your balances to an IRA or doing an in-plan conversion if it's offered by your employer along with a Roth option. ![]() You could then go a step further and convert your after-tax contributions to a Roth account. That's a powerful benefit on its own-but that's not the end of the story. Making after-tax contributions allows you to invest more money with the potential for tax-deferred growth. Potential strategies for after-tax 401(k) contributions
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