Two Rollover Checks
I had a 401k that i rolled over from Vanguard to my Financial Advisor. Seems after many years there was some post tax money in there. So they cut 2 checks. One big one which is eligible for rollover and then this small one for $20k which is post tax. I’m not 59 1/2 yet so what do i do with the post tax check? Can i just go and spend it? Or do i have to roll it into a separate IRA until i’m 59 1/2?
Permalink Submitted by Alan - IRA critic on Tue, 2022-05-24 15:10
Permalink Submitted by Matthew Morea on Tue, 2022-05-24 15:54
I think everything was done correctly. There was no withholding on anything. It was done as a rollover. The question is on the POST TAX piece. IT was not ROTH 401K money. It was post tax money from way back when. I dont think youre supposed to roll that into a ROth IRA. If i just put it in the bank- will i get hit with a 10% penalty for withdrawing before 59 1/2?
Permalink Submitted by Alan - IRA critic on Tue, 2022-05-24 18:07
If you do not need the after tax funds in the near future, the best option is to roll it into your Roth IRA as a tax free rollover contribution. If you do not want to, the distribution will still be tax and penalty free, and you will get a 1099R next January showing no taxable amount. Apparently the pre tax portion was done as a direct rollover or there would have been withholding taken out.