401k After tax question

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stocknoob4111
Posts: 3509
Joined: Sun Jan 07, 2018 11:52 am

401k After tax question

Post by stocknoob4111 »

I know I can make after tax contributions to a 401k and then do an in-plan Roth conversion of that amount which will then ensure that amount grows tax free. Couple of questions:

- Is the converted amount functionally the same as if I had directly made a Roth 401k contribution or is it treated differently?
- Is it possible to roll out the Roth portion from the Fidelity 401k to my standalone Roth at Vanguard?
- Does the 5 year withdrawal restrictions on the amount converted apply?
sailaway
Posts: 8215
Joined: Fri May 12, 2017 1:11 pm

Re: 401k After tax question

Post by sailaway »

1- yes
2- depends on plan rules
3- as long as it was converted with no gains, it should be penalty free; the 10% penalty will apply to any amount that was taxed at the time of conversion
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retiredjg
Posts: 54082
Joined: Thu Jan 10, 2008 11:56 am

Re: 401k After tax question

Post by retiredjg »

stocknoob4111 wrote: Fri May 27, 2022 1:34 pm - Is the converted amount functionally the same as if I had directly made a Roth 401k contribution or is it treated differently?
Both. The money is now in Roth 401k and treated as such. However, It might be treated differently in that you might be able to roll it out to Roth IRA. The law allows that. Your plan may not.

- Is it possible to roll out the Roth portion from the Fidelity 401k to my standalone Roth at Vanguard?
The law allows that. Your play may or may not allow that.

- Does the 5 year withdrawal restrictions on the amount converted apply?
Depends. Where do you want to withdraw it from? The Roth 401k or the Roth IRA? Were there any earnings before the conversion? If Roth IRA, what else do you have in Roth IRA and how and when did it get there?
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