401-K - Distinguishing Between Pre-Tax and After-Tax Contributions


For a 401-K, is there a way to differentiate (via data input) (1) the portion of a 401-K balance that is attributable to pre-tax contributions, employer matches and earnings on the account, from (2) the portion of the balance attributable to after-tax contributions? In other words, a way to enter the amount of the 401-K balance that will not be taxed upon withdrawal? Or perhaps a workaround?


dan royer's picture

If these contributions work like a ROTH or ROTH401k, but them in ROTH. Otherwise put them in IRA if they work that way (i.e., they are after tax and then do get taxed at withdrawal time). Just use ROTH or IRA.

Thanks. That might help some, but the situation I was trying to describe is one in which a participant has made both pre-tax and after-tax contributions to a 401-K. So the 401-K essentially has a "basis" equal to the amount of the after-tax contributions. Any and all of the future growth of the 401-K balance will be taxable when withdrawn. This would seem to distinguish this type of 401-K from a Roth IRA, where none of the future earnings will be taxable. A similar situation might arise with a traditional IRA for which only a portion of the contributions made over the years were deductible. For both situations, it would seem to be helpful to be able to specify the amount of the taxpayer's "basis" in the 401-K and the IRA.

I have a similar situation with a variable annuity (which is entered as a traditional IRA). What I ended up doing is I decided what year I would withdraw the after-tax portion. In that year I ran the reports without the withdrawal. Then I put in a retirement Special Withdrawal for the after-tax amount in the chosen year and ran the reports again. The difference of the Tax amounts in the two Tax reports for the chosen year was the amount of taxes that would have been incorrectly applied. To fix it, I entered a non-tax related special receipt for the difference to offset the tax incorrectly charged on that after-tax portion. Not perfect, and a bit of a hassle, but better than nothing until ESPlanner is hopefully enhanced someday.

Another part of this is the variable annuity is non-qualified, so Required Minimum Distributions (after age 70) do not apply. But in my case I entered special withdrawals for all the annuity money before age 70 (I am currently choosing to just withdraw the annuity rather than annuitize it), so there is no impact since the annuity money would be gone by age 70.


Thanks for the input, Tom. It looks like I will have to experiment with manipulating the data, like you did.

It would be nice to have a greater range of retirement accounts (types) in ESPlanner Plus, including the ability to enter one's tax basis for each. As noted in my earlier note, this might include 401-K's (which could reflect both the amount of after-tax contributions as well as amounts that will be taxable upon withdrawal, Traditional IRAs, for which some portion of the prior contributions were not tax-deductible, etc. I don't have direct experience with variable annuities, but that might be yet another category. And then those various categories could feed into (or be used to refine) the Order of Withdrawal in the Retirement Accounts section. This would give a better picture of the tax implications of future withdrawals, or so it appears to me.

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