How to Move a post-tax 401(k) to a Roth 401(k)
Co-Authored and Reviewed by Gagan Sandhu, MBA - The University of Chicago Booth School of Business, CEO of Xillion
Posted on . 2 min read
To move post-tax funds from a 401(k) to a Roth 401(k), you would typically need to execute an in-plan Roth conversion within your employer-sponsored 401(k) plan, if your plan allows for such conversions. Here's how you would generally go about it:
- Check Plan Eligibility: First, check with your employer's 401(k) plan to see if they allow for in-plan Roth conversions. Not all plans offer this option, so you will need to make sure it's available.
- Initiate the In-Plan Roth Conversion: If your plan allows for it, contact your plan administrator or HR department to initiate the in-plan Roth conversion. They will provide you with the necessary paperwork or guidance on how to proceed.
- Determine Tax Implications: When you perform an in-plan Roth conversion, the converted amount will be treated as taxable income in the year of the conversion. You will need to consider the tax consequences and may need to pay taxes on the amount converted.
- Specify the Funds to Convert: You can generally specify which funds or contributions within your 401(k) you want to convert to Roth. This allows you to convert just the post-tax contributions, leaving pre-tax contributions untouched.
- Complete the Conversion: Follow the instructions provided by your plan administrator to complete the conversion. The funds will be moved from the post-tax portion of your 401(k) into the Roth 401(k) account within the same plan.
It's essential to consult with your plan administrator and possibly a tax advisor to understand the specific rules and tax implications associated with in-plan Roth conversions in your 401(k) plan. The tax treatment can vary depending on your individual situation and the rules of your plan, so it's crucial to make informed decisions.
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