Can a 401K (w/ both pre & post tax contributions) be split to both traditional & roth IRA?
I have both per tax money and post tax money in my 401k.
I want to 'roll over' the post tax portion to a roth IRX,
and the pre tax (my contribution + the all gains) into a traditional IRA,
to reduce minimum requird distribution and retain a tax free investment account.
Answers
2775 points
Oldman answered 6 months ago …
The IRS rules are really clear, you can't segregate the taxed funds from the non-taxed funds in any split or transfer. Your basis (the already taxed deposits) are a portion of the total value. If you qualify (MAGI <100K) to do a full or partial conversion to a Roth, that "already taxed amount" is the non-taxable portion of any IRA...so if 17% of the total 401K balance is your already taxed money, then 17% of the conversion amount won't be subject to marginal tax rates.
I would check your postential tax liability in the current low-tax environment, because come 2010, the 100K limit is removed, and you can spread the tax liability over the next two years, 2011 and 2012, with 50% of the conversion tax (the value of the "not taxed yet" conversion) being due each year...BUT, the marginal tax rates may rise, unless the current lower rates are extended by the new congress.
