The Individual Retirement Accounts can be quite complicated especially when a rollover is on the mind. If you’re wondering whether or not after-tax contributions can be rolled over to a Roth IRA, the answer is yes. You can rollover after-tax contributions to a Roth IRA, and also without including earnings. If you should do it though largely depends on your situation. It’s best to see it for the long-term and figure out whether it will be a good investment choice or not.
Difference between traditional and Roth IRA
The main difference between a traditional IRA and Roth IRA is how they are taxed. When you contribute money to your Roth IRA, you pay taxes on the amount contributed. You don’t with a traditional IRA and taxed for your withdrawals. The more you withdraw from your traditional IRA, the more taxes you’ll pay whereas you don’t pay taxes for your Roth IRA contributions as they are funded with after-tax dollars.
Which one should you pick though? It largely depends on how much you are contributing at the moment and how much you’ll make at the time you’re eligible for making withdrawals. Because you will tax at the time of contributing to your traditional IRA, if you’re going to make more during retirement, it’s pointless to pay a higher income tax rate. Having said that, it’s best to think ahead and see what works for you, but all and all, you can rollover after-tax dollars to Roth IRA.