A 401K Rollover to 401K Roth Question

[amil23]

I am still in my former employer's retirement (401K) plan
This plan is with Fidelity and gives participants access to Fidelity's Retail side (except for our own company stock and some other esoteric opportunities).

I'm thinking about just rolling my RMDs into this 401K Roth instead of opening up a Fidelity retail account due to employer's transaction and fee expenses being less overall than I would pay retail.
So one question I can think of right now is this: For tax purposes does the 5 year rule apply as a "first in first out" rule, or are any contributions made as you go along considered tax-free after the first 5 years?

My reason for asking is I have a good sum of my 401K as after-tax money. If distributions are "first in first out" I was going to split up this after tax and add an amount to each taxable distribution as opposed to rolling the whole after-tax in as one lump sum.

I've been reading IRS website but haven't come across this yet.

Any ideas are appreciated. Thanks!

[hikernut]

RMDs cannot go into a Roth account, or any other tax-sheltered account for that matter.

[amil23]

Argh! I guess that would have been too easy.


Thanks!

[StealthRabbit]

Furthermore.... That 401k combo of Roth / taxable must be converted to a rollover IRA to get access to the funds, and to split that access Roth vs. taxable.

I've set up a passive invested rollover IRA to draw my RMDs, but I may switch that to my SDIRA that hosts an LLC which now owns real estate notes (fixed rate income stream).

I still hold a couple Fidelity managed combo Roth 401ks, and will likely continue those under Fidelity management as long as I don't need those funds. (Nominally superior asset protection of 401k vs IRA)

[Lowexpectations]

Originally Posted by StealthRabbit

Furthermore.... That 401k combo of Roth / taxable must be converted to a rollover IRA to get access to the funds, and to split that access Roth vs. taxable.

I've set up a passive invested rollover IRA to draw my RMDs, but I may switch that to my SDIRA that hosts an LLC which now owns real estate notes (fixed rate income stream).

I still hold a couple Fidelity managed combo Roth 401ks, and will likely continue those under Fidelity management as long as I don't need those funds. (Nominally superior asset protection of 401k vs IRA)

You’ve answered the question most likely incorrectly and you don’t have enough information from the OP to actually answer properly.

If his after tax balance isn’t Roth, he can roll the basis directly to a Roth IRA, the growth can either go to a taxable account and those dollars are taxable at that time or those dollars can go into an Ira nontaxable at the time of the rollout. The plan administrator would handle this via more than one check. If the after tax balances are Roth 401k the entirety can go into any Roth IRA of his that he wishes, non taxable

Your claim of must be converted to a rollover Ira is simply incorrect no matter what information we have. You are giving subpar advice

[StealthRabbit]

I got my information from fidelity last week, on a similar/ identical 401k , (mine is 60% Roth 401k and 40% taxable (in the same 401k). To access any of those funds, the entire 401k must be closed and rolled to a rollover IRA. I'm no longer employed with my company that was having Fidelity manage 401k assets. So I can no longer dabble or withdraw from the 401k, and leave it intact.

Just the scoop for my custodian, Fidelity.

[StealthRabbit]

And.... Yes, of course... If you close / rollover a blended 401k, the appropriate balances can be rolled to Roth and Taxable,with out immediate tax consequences (thus the term "Rollover" is a non-taxable event, until taking distributions).

Taxable basis of the rollover can only be applied to a Roth, based on eligibility.... Ie. Earned income and limits reported in the tax year of intended contribution.

All very well explained and executed within Fidelity.
No mystery or reporting error required.

[lottamoxie]

Originally Posted by Lowexpectations

If his after tax balance isn’t Roth, he can roll the basis directly to a Roth IRA, the growth can either go to a taxable account and those dollars are taxable at that time or those dollars can go into an Ira nontaxable at the time of the rollout. The plan administrator would handle this via more than one check. If the after tax balances are Roth 401k the entirety can go into any Roth IRA of his that he wishes, non taxable.

Glad you answered. I knew it would ping your Roth radar!

[amil23]

I had given thought to moving all taxed contributions to a Roth IRA but at my age I didn't know if it would be worth it. We have a way to invest through our bank but I'm thinking of just having my RMDs go to a Fidelity retail account.

[hikernut]

Originally Posted by amil23

I had given thought to moving all taxed contributions to a Roth IRA but at my age I didn't know if it would be worth it. We have a way to invest through our bank but I'm thinking of just having my RMDs go to a Fidelity retail account.

The choice to do Roth conversions will depend on the particulars of your own situation. There have been many past discussions of the topic here, and in the Retirement C-D forum.

One thing to consider is the elevated cost of Medicare premiums if you exceed certain income thresholds. See the tables for Part B premium, and Part D premium, in the document below.

https://www.medicare.gov/Pubs/pdf/11...care-costs.pdf

Because of this hazard some folks choose to do limited-size conversions annually, or perhaps none at all.