Personal Finance and Investing

We had 401K with employer that included "pre 1987" contributions. Which meant, I later realized, after tax contributions.

In 2006, I think, I read someplace that it was a bit complicated with having a 401K with a former employer and an IRA with a different custodian. I think that the rules have changed since.

So decided to roll over to Vanguard. Since these are, after all, Individual accounts we had to do them individually. My rep immediately noted the amount which was "pre-1987" and said that this amount would be cashed out.

Not so with my spouse's. And a larger amount.

Some years later we wanted to withdraw that amount and the Vanguard could not identify it. As I've read recently, mixing pre and after tax contribution is like adding cream to your coffee. Once they are mixed they cannot be separated. I consulted a CPA and honestly could not believe it.

So I called the iRS. Those days they would take a call, would take time to talk to you, especially off season. That agent was very emphatic - don't roll over after tax contributions! Take it out! Buy a car! Take a cruise! While employers do keep track of these "coffee and cream" funds, once they are rolled over they are mixed forever. I asked him why this info was not widely available and he said that very few people were affected. Ha!

Will have to file 8606 for the rest of our lives. No, deciding that 10% if after tax and pay tax on only 90% of the withdrawals won't do it.

Yes, Minnesota. Have to file Form M1M for one entry - Social Security benefit Subtraction - and the calculations for this line took a whole page on the instructions. And I don't think that it will change. Has nothing to do with adaptation to the federal one.

Still deep sigh..