Keener Financial Planning

Keener Financial Planning is a Fee only Certified Financial Planner in Dallas, Ft. Worth, and Keller, TX. Call us to schedule today at (817) 993-0401.

817-993-0401 | [email protected]

  • About Us
    • Our Company
    • Our Services
    • Our Process
    • Meet our Team
    • Affiliations
    • Fee Schedule
    • Disclosure
  • Financial Planning
    • Planner Interview Questions
    • How Planners Are Paid
  • Resources
    • Client Log-In
    • Forms
  • Blog
  • Contact Us

After-tax retirement contributions: how to know if you have any

October 23, 2021 By Jean Keener, CFP, CRPC

After-tax retirement contributionsWith all the talk about converting after-tax retirement contributions to Roth, you may be wondering if this applies to you.  Here’s how to tell if you have any after-tax money in an IRA or 401k.

First, let’s cover the difference between after-tax money and Roth.

Both after-tax and Roth contributions are made with money that’s already been taxed.  The difference is in how the earnings are treated.

The growth on after-tax money isn’t taxed until the funds are withdrawn from the retirement plan.  When you withdraw it, you pay regular income tax on all of the earnings you’ve accumulated over the years.  You don’t pay tax on the original contributions when withdrawn because they were already taxed when you made the contribution.

With Roth contributions, the earnings are never taxed as long as you meet certain requirements.  So you are able to withdraw the contributions and earnings with no tax cost.  Pretty nice, right?

After-tax money in IRAs

You get after-tax money in IRAs by making non-deductible IRA contributions.  Contributions to IRAs are non-deductible if your income exceeds certain levels and you have access to an employer retirement plan.  When you make a non-deductible contribution, you file form 8606 with your tax return to track the contribution.  Your IRA custodian does not track this for you, so it’s important to maintain your own records by filing this form.

We’ve observed that sometimes when people change tax software or tax preparers, the record of prior years’ non-deductible IRA contributions is lost.  You can still reconstruct these records by going back to the old tax returns.  If you believe you’ve made non-deductible IRA contributions in the past but don’t have a current form 8606 with this year’s tax return, we’d encourage you to research this now.  Without these records, you would pay taxes on the non-deductible contributions again when withdrawing the money — a serious bummer!

After-tax retirement contributions in 401ks

Retirement contributions of after-tax dollarsYou can tell if you have after-tax money in a 401k by looking at your full statement.  There is usually a section called “Activity by contribution source” or “Sources” or something else similar.  You may also see a label that says “Post-1986 Cost Basis” or “After-tax cost basis.”  Any of these labels are an indication that you have after-tax money in your plan.

Many employers don’t offer after-tax contributions, but enough do that it’s worth checking.  If you can’t tell from your statement, you can call your plan administrator’s client service line and ask them if you have any after-tax contributions in the plan.

If you determine that you have after-tax funds in a 401k or IRA, then consider whether it’s beneficial for you to convert them to Roth.  Here’s our blog post on the topic.

Filed Under: News, Retirement, Taxes, Your Finances Tagged With: after-tax retirement contributions

Free E-Newsletter

Sign up to receive free financial planning email updates. We'll never sell your address or spam you.

Latest from Facebook

Comments Box SVG iconsUsed for the like, share, comment, and reaction icons
Keener Financial Planning
2 days ago
Keener Financial Planning

Another helpful reminder that we don't have to predict the timing of recessions to be successful long-term investors! ... See MoreSee Less

Link thumbnail

Long-Term Investors, Don’t Let a Recession Faze You | Dimensional

www.dimensional.com

In the past century, there have been 15 recessions in the US. In 11 of them, stock returns were positive two years after the recession began.
View on Facebook
· Share
Share on Facebook Share on Twitter Share on Linked In Share by Email
Keener Financial Planning
5 days ago
Keener Financial Planning

Our quick reference for 2024 financial planning figures is now available -- it includes the 401k, IRA, and HSA contribution maximums and more! ... See MoreSee Less

Link thumbnail

2024 Key Financial Planning Numbers - Keener Financial Planning

keenerfinancial.com

Here’s a quick-reference sheet for some of the 2024 key financial planning numbers. It includes tax brackets, retirement plan contribution maximums, education credits, estate tax exemptions, HSA and...
View on Facebook
· Share
Share on Facebook Share on Twitter Share on Linked In Share by Email
Keener Financial Planning
1 week ago
Keener Financial Planning

We're so honored to be included in the D Magazine Best Financial Planners and Top Wealth Managers list again!

keenerfinancial.com/keener-financial-in-d-magazine-2023-best-financial-planners-and-top-wealth-ma...
... See MoreSee Less

Were so honored to be included in the D Magazine Best Financial Planners and Top Wealth Managers list again!

https://keenerfinancial.com/keener-financial-in-d-magazine-2023-best-financial-planners-and-top-wealth-managers/
View on Facebook
· Share
Share on Facebook Share on Twitter Share on Linked In Share by Email
Load more

Discuss if we’re a good fit for you

Contact Us

Main Office:

1692 Keller Parkway
Keller, TX 76248

Ph: 817-993-0401
Fax: 817-993-0002

Satellite Office:

2626 Cole Avenue, 3rd floor
Dallas, TX 75201

  • Email
  • Facebook
  • LinkedIn
  • Twitter

FORM CRS RELATIONSHIP SUMMARY (ADV Part 3) · Copyright © 2023 Keener Financial · All Rights Reserved