Basically when you pull money out of 401k to put in Rollover IRA, the after-tax 401k portion can go directly into a Roth IRA.
“While plans will still need to be cautious to navigate the ACP (Actual Contribution Percentage) test, where feasible the new “hierarchy” of tax-efficient savings strategies for retirement may now be:
– Obtain 401(k) match;
– Contribute further to max out pre-tax IRA and 401(k), or instead a Roth IRA and Roth 401(k) if current tax rates are low;
– Make after-tax contributions to the 401(k) plan if permitted, up to the annual defined contribution plan limits, in anticipation of converting those after-tax contributions in the future;
– Contribute to a low-cost non-qualified deferred annuity being used for tax deferral (which gets the tax-deferred growth treatment like after-tax contributions to a 401(k) plan, but not the ability to do a subsequent Roth conversion of the cost basis!)
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But does this assume you have no other iras? For example. Is this still allowed if you have a rollover IRA?
