Rolled over husband's 401(k) to IRA after his death. Can I deduct a loss since?
First: In most cases when you inherit stocks the cost basis is stepped up to the date of the death of the person you inherited them from. So the capital gain/loss is likely reset to zero. The rules vary a bit for joint accounts, but retirement accounts (401k/ROTH) are considered individual accounts by the IRS. The rules on this have changed a lot in recent history, so it may depend on when he died. Update: As JoeTaxpayer pointed out and I confirmed via this site , the gains are NOT stepped up for retirement accounts, so this is a moot point anyway.  Further evidence that retirement accounts can be complicated and seeking professional guidance is a good idea. ...[T]here is no step-up in cost basis   upon the death of the IRA owner. Most   other assets owned by an individual   receive a step-up in cost basis upon   the death of the person, eliminating   all capital gains on those assets up   to that point in time. Second:  Even if you can deduct an investment (capital) loss, you can only deduct it to offset capital gains on another investments. Also you can only do this up to $3k per year, though you can roll over excess capital losses into future years. Bottom line: I really doubt you are going to be able to claim a deduction. However, due to the complexity of the situation and the amount of money involved. I strongly suggest you talk to a qualified tax adviser and not rely solely on information you gather through this site. I trust the 401(k) was a traditional, pre tax account. There was no tax paid, and any withdrawals would be taxable. The account could go to zero, and there's no write off, sorry. I have to ask - were there any withdrawals along the way? What was it invested in that lost 90% of its value?  Edit - I'm sorry the OP came and went. It would be great to have closure on some of these issues. Here, I'm thinking as Duff said, malpractice, or perhaps a 401(k) that was 100% in company stock. Seems we'll never know.
While you can borrow money from a 401(k) for your home down payment, there are disadvantages, including but not limited to: The 401(k) is designed as a way to save for retirement. Smaller contributions and balances (due to the loan) in your account will add up and significantly reduce your balance over time. If you lose your job you will have to pay back the loan quickly, within 60 days. Interest on the 401(k) loan is also not tax-deductible, even if you're using it to pay for a home. My advice: max out any employer contributions to your 401(k) because it's free money. After that, extra savings for a house should be in a separate account. I am assuming that you are talking about rolling a 401k over to an IRA since if you were rolling over to another 401k you probably would not have a choice as to where it would be. Ameriprise will generally have lower fees than JPMorgan. (Probably why your husband's mutual fund is with Ameriprise.) Additionally having both accounts with Ameriprise will better allow them to assist you with your long term financial planning. For these two reasons I would recommend rolling your account over to Ameriprise.   No, I do not work for Ameriprise The money that you have under your control (e.g. in bank accounts, savings accounts, taxable investments, etc) is your money and there is no tax of any kind (either in India or in US) that needs to be paid when the money is transferred to India. As Dheer's answer says, you need to transfer all these monies within 7 years as per Indian tax law. For your 401(k) account, assuming that all the money is tax-deferred (i.e. you contributed to a regular 401(k) and not a Roth 401(k)), you will have separated from service as far as US tax law is concerned. So, check if it is at all possible to roll over the money into a similar scheme in India, specifically the Employees Provident Fund. Wikipedia says The schemes covers both Indian and international workers (for countries with which bilateral agreements have been signed; 14 such social security agreements are active). and so a rollover might be possible. If not, you could withdraw small amounts each year and avoid US income tax (but not the 10% excise tax), but how long you can continue holding 401(k) assets after return to India and whether that is long enough to drain the 401(k) are things that you need to find out. Yes, this is right.  It is what I am doing.  In fact, I took it one step further.  During my early career when I was able to deduct traditional IRA contributions, I made them and saved on taxes.  When my income got high enough that I could no longer deduct those contributions, I rolled all my traditional IRA's into my 401(k).  Now they are no longer subject to the pro-rata rule and I could begin with the backdoor Roths while continuing to contribute the max to my traditional 401(k). Thereafter it's pretty much the process you have described. "I think there are several issues here. First, there's the contribution. As littleadv said, there is no excess contribution. Excess contribution is only if you exceed the contribution limit. The contribution limit for Traditional IRAs does not depend on how high your income goes or whether you have a 401(k). It's the deduction limit that may depend on those things. Not deducting it is perfectly legitimate, and is completely different than an ""excess contribution"", which has a penalty. Second, the withdrawal. You are allowed to withdraw contributions made during a year, plus any earnings from those contributions, before the tax filing deadline for the taxes of that year (which is April 15 of the following year, or even up to October 15 of the following year), and it will be treated as if the contribution never happened. No penalties. The earnings will be taxed as regular income (as if you put it in a bank account). That sounds like what you did. So the withdrawal was not an ""early withdrawal"", and the 1099-R should reflect that (what distribution code did they put?). Third, even if (and it does not sound like the case, but if) it doesn't qualify as a return of contributions before the tax due date as described above (maybe you withdrew it after October 15 of the following year), as littleadv mentioned, your contribution was a non-deductible contribution, and when withdrawing it, only the earnings portion (which after such a short time should only be a very small part of the distribution) would be subject to tax and penalty." I'd hazard that Jim is mostly worried that people are getting ripped off by high employer 401(k) fund fees. A lot of employers offer funds with fees over 1% a year. This sounds low-ish if you don't realize that the real (inflation-adjusted) return for the fund will probably average out to about 4%, so it's really something like a quarter of your earnings gone. With an IRA, you don't have to do that. You can get an IRA provider which offers good, cheap index funds and the like (cough Vanguard cough). Fund fees will probably be closer to 0.1%-ish. HOWEVER. The maximum IRA contribution in 2013 will be $5,500. The maximum for a 401(k) contribution will be $17,500. That extra capacity is enough to recommend a 401(k) over an IRA for many people. These people may be best served by putting money into the 401(k) and then rolling it over into a rollover IRA when they change jobs. Also, certain people have retirement plans which offer them good cheap index funds. These people probably don't need to worry quite as much. Finally, having two accounts is more complicated. Please contact someone who knows more about taxes than I am to figure out what limitations apply for contributing to both IRAs and 401(k)s in the same year. You can do this with no problem. What you want is a direct transfer style of rollover. This is simply where the money is transferred from your 401(k) custodian directly to your new IRA custodian. This will ensure there are no taxes or penalties on the balance.  The key is that the money is moving directly to the new account without you having direct access to the balance. This keeps the money out of your hands in the eyes of the IRS. The process should look something like this: A few notes: "Some 401k plans allow you to make ""supplemental post-tax contributions"". basically, once you hit the pre-tax contribution limit (17.5k$ in 2014), you are then allowed to contribute funds on a post-tax basis. Because of this timing, they are sometimes called ""spillover"" contributions. Usually, this option is advertised as a way of continuing to get company match even if you accidentally hit the pre-tax limit.  But if you actually pay attention to your finances, it is instead a handy way to put away additional tax-advantaged money.  That said, you would only want to use this option if you already maxed out your pre-tax and Roth options since you don't get the traditional tax break on contributions or the Roth tax break on the earnings. However, when you leave the company, you can transfer the post-tax money directly into a Roth IRA when you transfer the pre-tax money, match, and earnings into a traditional IRA."