IRA Rollover

Question: What’s the tax treatment for after-tax contribution and earnings in a 401K plan re-directed to an IRA rollover

Can the after-tax earnings rolled over to an IRA with tax-deferral or transferred to a regular brokerage account? If to a brokerage account what’s the tax treatment, ordinary tax or capital gains? Any other thoughts?

Answer: I wish I could answer this, as I have been wondering myself! I max out my pre-tax dollars in my 401k plan, and still have money left over at the end of the month. So, I started making after-tax contributions to the plan as well.

From what I understand, these dollars are very similar to an annuity (taxes already paid on principle, but gains are not taxed until withdrawn), so there may be a possibility of rolling the after-tax dollars into an annuity without penalty or taxes. Since I’m not ready to roll over just yet, I’ve been letting it sit as it is and have not taken any action. Your investment company or financial advisor should be able to answer.

Glad you asked the question and hope for a more direct answer than mine.

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