Confused About Rolling Over My Roth 401K to IRA

Main Problem:

  • Luke is confused about rolling over his Roth 401K to a Fidelity Roth IRA, specifically regarding the destination accounts for pre-tax and after-tax assets.

Solutions Discussed:

  • Typically, pre-tax assets from a 401(k) should be rolled into a Traditional IRA, while after-tax assets can go into a Roth IRA without tax consequences.
  • It’s important to consult with a tax professional for personalized advice on potential tax implications when rolling over funds.
  • Luke can verify if he has pre-tax money in his Roth 401(k) by checking contribution sources on the NetBenefits website.
  • Employer contributions might be pre-tax and could be subject to a vesting schedule, which means he may lose those contributions if he is not vested.
  • For specific plan details, reviewing the Summary Plan Description (SPD) and contacting the Workplace team for assistance is recommended.
Here’s the full thread
luke
10/06/2023 at 10:36:56 PDT
I had a Roth 401K at my old employer, I’m trying to do a direct rollover to my Fidelity ROTH IRA account, however I am confused on the Destination Account for Your Roth Pre-Tax Assets and Destination Account for Your Roth After-Tax Assets. The Roth pre-tax assets appear to be the fractional shares worth of the company stock I bought. Am I fine to roll both of these to my Roth IRA without penalty or potential taxes assuming i keep it until I turn 59 1/2?
luke
10/06/2023 at 10:49:29 PDT
Can’t I continue to defer my earnings into the new roth account and withdrawal them tax-free at 59 1/2?
FidelityJames
10/06/2023 at 11:56:45 PDT
Thanks for joining us on our Discord today! Typically, when rolling over old workplace plans, if the 401(k) holds pre-tax assets, the rollover will go to a Rollover (Traditional) IRA, while after-tax 401(k) assets would be rolled into a Roth IRA. A direct rollover from a Roth (after-tax) 401(k) plan into a Roth IRA is generally not a taxable event. However, if you have any pre-tax money in the 401(k) plan that you roll into a Roth IRA, that would be considered a Roth conversion, which is a taxable event. In that case, the pre-tax money converted to a Roth account would be subject to earned income tax for the year. Additionally, earnings may be subject to taxation if you’re under the age of 59 ½. If you have questions about your specific situation, please consider contacting a qualified tax professional. Here are the detailed steps on how to get your 401(k) rolled over to an IRA: https://www.fidelity.com/retirement-ira/401k-rollover-ira-steps Something else you might want to know is that when funds are rolled over from a Roth 401(k) to a Roth IRA, the rolled-over funds inherit the same timing as the Roth IRA. This means the aging period for the Roth IRA applies to the funds rolled over from the Roth 401(k) account. If you roll Roth 401(k) funds into a Roth IRA that has met the 5-year aging period, those rolled-over funds have met the aging requirement. Once again, it’s best to review your specific situation with a tax professional to ensure you’re making the best choices for you. Let us know if you have additional questions; we’re happy to help!🟢
luke
10/06/2023 at 12:04:51 PDT
How would I have pre-tax money in a Roth 401k? All my contributions were made post-tax
FidelityShea
10/06/2023 at 12:24:09 PDT
Hey there @luke, generally speaking it’s possible to have a 401(k) that allows for both pre-tax and Roth 401(k) contributions. It sounds like you may have already double-checked your contribution sources on NetBenefits.com, but to confirm, you can review these one of two ways. While viewing your plan, you can: 1. Select “Show Details” beneath the “Sources” chart 2. Go to the “Transaction History” tab, choose a timeframe, and select the “Sources” view If you’d like to review your contributions in more detail, our Workplace team can help. To find the different ways to reach them, click the “Customer Service” icon near the top right corner of the NetBenefits website. Associates are generally available Monday through Friday from 8:30 a.m. to midnight ET to assist you. 🟢
luke
10/06/2023 at 12:29:06 PDT
I read that employer contributions count as pre-tax when doing a rollover, but I lose my employer contributions because I’m not vested
FidelityShea
10/06/2023 at 12:39:49 PDT
It’s true that employer contributions may follow a vesting schedule. A vesting schedule dictates the amount of time you must remain with a company in order to withdraw all or a portion of the companies contributions to your 401(k). That said, every 401(k) is different, so you’ll need to understand the rules of your specific plan. You can review the Summary Plan Description (SPD) to additional insight. To access the SPD, log into NetBenefits.com, then follow these steps: 1. On the NetBenefits home page, click on your 401(k) plan 2. Access your plan’s “Summary” page, then click on the “Plan Information” tab 3. Under “Plan Information and Documents,” click on “Summary Plan Description (SPD)” Since we’re unable to review account-specific details over Discord, speaking with our Workplace team would be the next best step for answers to plan-specific questions.

Leave a Reply

Your email address will not be published. Required fields are marked *