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re: Roth IRA early distribution: Principal subject to 10% tax before 5 years?
Posted on 8/26/14 at 3:50 pm to LSUFanHouston
Posted on 8/26/14 at 3:50 pm to LSUFanHouston
quote:
So if you have a 401(K) with Roth designated contributions, you really have two balances - one with your contributions, and one (that is not a Roth) with the employer contributions.
Interesting
1
Posted on 8/26/14 at 3:53 pm to LSUtoOmaha
quote:401k is what I meant...sorry for the confusion
I would presume they do in Roth 401ks. That is why I am wondering if he is getting them confused. I don't know of a scenario in which you would be drawing employer contributions from a Roth IRA unless it was part of a rollover
Posted on 8/26/14 at 6:09 pm to LSUtoOmaha
quote:
Interesting
Think about it. The whole idea of a Roth is that you fill it up with after-tax dollars. 401(K) employer contributions are not included in wage income of the employee. i.e. it's not taxed, it's in effect the same as pre-tax dollars.
Now... I have heard.... that IRS is considering a regulation that would allow employees to elect to have the value of the employer contribution included in the employee's wage income on Box 1 of W-2, and then allowed to be credited to the Roth side of a 401(K). There is precedent for this... certain disability plans that are 100 percent employer paid offer an election to have the employer-paid premiums trated as income to the employee, which then causes any disability benefits rec'd to be not subject to taxation. Who know if this will ever happen.
This post was edited on 8/26/14 at 6:11 pm
Posted on 8/26/14 at 11:35 pm to LSUFanHouston
quote:
Any contribution that an employer makes to a 401(K) or similar account is a pre-tax, regular contribution - i.e. not a Roth.
So if you have a 401(K) with Roth designated contributions, you really have two balances - one with your contributions, and one (that is not a Roth) with the employer contributions.
Once you rolled your 401(K) balance to an Roth IRA, that amount would end up in Bucket 2.
Does this make it two separate accounts then?
Posted on 8/27/14 at 3:58 pm to TigerDeBaiter
quote:
Does this make it two separate accounts then?
The regulations require the contributions and associated earnings to be "accounted seperately".
Whether this is via two accounts, or one account with two sub-accounts, or a statement with a breakdown into two balances, etc, is up to the custodian.
If you roll these things out of yout 401(k), you should be able to roll them seperately (unless you want to make a roth conversion on the employer contribution amounts).
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