Secondary menu

How to handle after-tax 401k contributions

Submitted by mvhaddad on 8 November 2009 - 8:50pm

My 401k contains both before and after-tax contributions. How do I enter this?

‹ How to make a retirement account last contribution and first withdrawal at the same age Converting to a Roth IRA ›
Submitted by Dick Munroe on 10 November 2009 - 11:02am.
1

The entire (non-Roth) 401k contribution is assumed to be deductible, so you need to estimate the amount of tax that you owe on the after tax portion of the contribution and enter a special expenditure to cover the tax payment.

Best,

Dick Munroe

Submitted by mvhaddad on 11 November 2009 - 7:20am.
2

Thanks for your answer. Now that I know how to handle the contributions, what is the process for handling the distributions? Since I am very near retirement, that is my main focus. About 30% of the 401k is after-tax, and would not be taxable upon distribution.
Regards,

Mike

Submitted by Dick Munroe on 11 November 2009 - 9:10am.
3

Ah, what you are describing is a Roth IRA, not a normal IRA. With a Roth, contributions are taxable, withdrawals are not. So the easy way to handle this is to is to split your IRA into two different IRAs, one standard into which you make deductible contributions and withdrawals are taxable and one Roth into which you make taxable contributions and withdrawals are not-taxable. You do this as a convenience for your calculations, not as a representation of your real holding in a Roth IRA.

Do this and everything drops out.

Best,

Dick Munroe

Share this

Navigation