Just did an in-service distribution of my post-tax 401k to my Roth IRA. Super easy! I’ve been putting it off for so long thinking it would have been a pain in the ass. If anyone at PwC needs to...

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Post-Tax 401k =/= Roth 401k

Post Tax Contributions in a 401k do not grow tax free, hence the benefit to distribute them to a Roth IRA where they now grow tax free

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All you need from your brokerage is your who the checks are Payable to (call your brokerage for who to to have our plan administer write the checks to), your Traditional IRA Acct # (for interest earned on the post-tax dollars), and Roth IRA Acct # (for post-tax contributions).

Our plan administer will write the checks and mail direct to you, and our responsibility to forward to the brokerage.

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Ohhh so THATS a mega back door roth. I haven’t quite gotten there yet financially but good to know! So it’s essentially a way to transfer post tax dollars within a 401k to a Roth IRA at a brokerage? Effectively increasing the 2019 limit beyond 6k. Very cool!

Why do post-tax contributions in a 401k not grow tax free?

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I’m not exactly sure what an in-service distribution is? Is that like a direct deposit to a Roth IRA? If so, why not just set up an automatic transfer from your checking or savings acct to your brokerage?

SC1, if your 401k allows for post-tax contributions, you can distribute those funds to a Roth IRA (if your plan allows for in-service distributions and has a post-tax option).

IRA limits in 2019 are only $6k. However, if you distribute post-tax dollars from a 401k, there are no limits (up to the total contribution limit of $56k, less firm contributions and pre-tax contributions). It is a mechanism to grow your Roth IRA much quicker.

Google Mega Backdoor Roth IRA for more info

I was actually just thinking about this Op. is it very beneficial from a tax perspective once we reach retirement ?

P1, when you begin withdrawing from your Roth IRA in retirement, all growth is tax free

But do we take a tax hit now because funds in our 401k were invested tax free ?

My bad it’s only post tax that we can travser correct ?

P1, that is correct
SC1, yup, it is pretty cool!

Post-Tax 401k Contributions are not that same as Roth 401k. A Roth 401k does indeed grow tax free, but post-tax does not. Not all plans offer Roth 401k. PwC does not. However, you can do post-tax Contributions

The annual limit to 401k Contributions Roth or Pre-Tax is $19k (in 2019). Anything beyond that is a Post-Tax Contribution up to Total Contribution limit of $56k ($56k total contribution = (Pre-Tax + Roth up to $19k) + Employer Contribution + Post-Tax Contribution).

Ah thank you that helps! So a post-tax 401k is essentially a traditional brokerage account but within a 401k. So you’d have to pay cap gains tax on it upon withdrawal, but with Roth 401k you would not?

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