Modeling 401-k after-tax contributions and balances


The 401-k after-tax balance should be entered into the "ROTH accounts" totals based on prior questions. This does address the tax exemption on withdrawal but does not address the taxable gains since ROTH balances are tax exempted.

For after-tax contributions, I'm assuming they are also entered on the contribution tab as "ROTH" since contributions are not tax exempt. Again, the gains on these contributions should be taxed upon withdrawal.

Is this the "best" way to handle it? I can't think of a way to correct the under taxation since everything is rolled into a single ROTH balance and real ROTH accounts are also involved.


dan royer's picture

Pre-tax contributions to your 401K or IRA are handled by the program with appropriate tax consequences at the time they are contributed and the time they are withdrawn. If you enter ROTH contributions, the program knows that money contributed to the ROTH grows tax free and is tax free on the withdrawal. So the program is aware of those distinctions.

I'm not sure what a 401K after tax balance is. The 401K is pre-tax contribution and grows tax deferred and then is taxed on withdrawal.

If you are making after tax contributions to an account might be handled by making a series of "special expenditures" with appropriate tax consequence (presumably none) and then a series of "special receipts" with appropriate tax consequence based on a side calculation. If you use the ROTH, as you say, the withdrawals are tax free.

I'm referring to contributions to a traditional (non-ROTH) 401k using after tax dollars because the IRS 401k pre-tax contribution limit has been hit. My employer matches 401K contributions up to 8% salary.

Since the contributions are after-tax dollars, they act like contributions to a ROTH (no impact to AGI). Unlike the ROTH, the gains are taxable.

To make the special receipt/expenditures, I need to know how much of the withdrawal from the retirement account is based on the gains of the after-tax contributions. Since the reports just show an aggregated number, I can't figure out how much came from ROTH, 401k, employer, etc to perform the side calculations or when to stop them.

It is more important to confirm the approach for entering the data is correct.

Going forward, it would be very helpful to see the details behind the retirement withdrawals.

dan royer's picture

OK, yes, that's tricky: like a ROTH going in, like a 401K coming out. Our program does not formally incorporate non-deductible IRAs. But you can

1. enter future contributions to these accounts as non-tax related special expenditures.

2. enter a) the future withdrawals of the principal of these contributions as non-taxable special receipts and b) the future withdrawals of the investment income earned on these contributions as taxable special receipts. Withdrawals based on existing non-deductible IRA account assets can be treated the same way.

" ... like a ROTH going in, like a 401K coming out. ..."

It's even more tricky than that, if I understand the description correctly. Because the contributions were from already-taxed money, only the gains are taxable, not the original contributions. How you can keep track of that and discriminate between the sources, I haven't a clue.

dan royer's picture

I agree. I think that would be difficult.

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