401k Transfer
I recently quit my job and transferred my 401k to a Roth IRA by mistake, is there anyway to undo it? Nobody informed me about the tax issue.
I recently quit my job and transferred my 401k to a Roth IRA by mistake, is there anyway to undo it? Nobody informed me about the tax issue.
Permalink Submitted by Alan - IRA critic on Fri, 2021-10-15 16:08
There is no way to undo this if the plans were just following your instructions. Keep in mind that the taxes due may be painful next April, but you will benefit in the future since future distributions from the Roth will likely be tax free. However, if you are under 59.5 you will incur a 10% penalty if you withdraw from the rollover amount in the first 5 years.
Permalink Submitted by Amy Sin on Fri, 2021-10-15 17:22
So, I need to pay tax on the rollover amount, but not subject to the 10% penalty?
Permalink Submitted by Alan - IRA critic on Fri, 2021-10-15 17:28
Yes. There is no penalty for the Roth rollover. Are you sure the 401k was a pre tax 401k and not a Roth 401k? It is also possible there were some after tax contributions in the pre tax portion of the 401k, and any after tax contributions would not be taxable.
Permalink Submitted by Amy Sin on Fri, 2021-10-15 17:35
I am so stressed now, the 401k includes my contributions, plus profit sharing from my company. Is the profit sharing portion also taxable?