How to Fund a Roth IRA Through a Standard 401(k)

via Wall Street Journal

I have read recent articles on making after-tax contributions to a 401(k) plan and later rolling them into a Roth IRA. I work for a company that offers the standard pretax 401(k) and the after-tax Roth 401(k). How do I go about putting after-tax money [into my standard 401(k)] so that, say, 10 years from now, when I leave the company, I can roll all my after-tax money into my Roth at a securities firm?

The strategy you are asking about is an appealing one to people who are already setting aside the maximum salary deferral into a traditional 401(k) or a Roth 401(k), or a combination of the two: If their plan allows, they can put additional dollars into the traditional 401(k) on an after-tax basis and then roll that to a Roth IRA when they leave the company—a move that was simplified by the Internal Revenue Service in a ruling last year.

The first step is to figure out if your traditional 401(k) plan accepts after-tax contributions. One place to look is the “summary plan description,” available from your employer or, perhaps, on the website for your company’s 401(k) plan…

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About thebenefitblog

Eric is a Producer at Lockton Insurance Brokers, Inc., the world’s largest privately held commercial broker. Eric has over 23 years of experience in the insurance industry and has spent the last 11 years with Lockton. Eric specializes in Health & Welfare Benefits, Retirement Planning, and Executive Benefits. Eric's clients utilize his expertise in the areas of Plan Due Diligence, Transaction Structure, Fiduciary Oversight, Investment Design, Compliance and Vendor negotiation to improve the operational & financial outcome for each client. The Benefit Blog is a place to share that expertise and industry news.
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