'For PepsiCo employees, maintaining organized retirement records and understanding how IRA distributions are documented can help support informed retirement planning decisions, and Paul Bergeron, a representative of The Retirement Group, a division of Wealth Enhancement Group, encourages individuals to work with qualified professionals to better understand their options as they prepare for retirement.' – Paul Bergeron, a representative of The Retirement Group, a division of Wealth Enhancement Group.

 'PepsiCo employees who take the time to maintain accurate retirement records and review important IRA documentation are often better prepared for key retirement decisions, and Tyson Mavar, a representative of The Retirement Group, a division of Wealth Enhancement Group, encourages individuals to stay organized and seek professional guidance when evaluating their retirement planning options.' – Tyson Mavar, a representative of The Retirement Group, a division of Wealth Enhancement Group.

In this article we will discuss:

1. Why keeping track of after-tax IRA contributions is important to help reduce the chance of unnecessary taxation.

2. The key forms and records you should maintain, including IRS Form 8606, Form 5498, and Form 1099-R.

3. Practical steps to help reduce common IRA distribution mistakes when taking withdrawals or rolling over retirement savings.

A distribution from your traditional IRA could cost you if you’re not aware of your responsibilities. For PepsiCo employees preparing for retirement or managing retirement savings after leaving the company, understanding these rules can help reduce unnecessary tax complications.

Why It Matters

Many investors save for retirement through workplace accounts like 401(k)s. While 401(k) plan administrators handle certain recordkeeping responsibilities, IRA custodians generally do not track after-tax basis for you. It is your responsibility to keep records of your IRA contributions and distributions so you can accurately report them and reduce the possibility of paying income tax twice on after-tax contributions.

Denise Appleby, known as 'The IRA Whisperer,' has written about how IRA owners can help reduce the likelihood of costly mistakes.

7 Questions on How to Reduce IRA Distribution Mistakes

1. What is a traditional IRA, and how can someone fund their account?

2. How are distributions taxed when a traditional IRA contains both pre-tax and after-tax money?

3. What are the different responsibilities of an IRA custodian compared to a 401(k) plan administrator when it comes to tracking after-tax dollars?

4. What should retirees and other taxpayers review when they receive Form 1099-R from their IRA custodian?

5. What is IRS Form 8606, and why is it important?

6. What records should taxpayers keep to help reduce the chance of paying income tax twice on after-tax retirement money?

7. What are the key steps to help reduce costly IRA distribution mistakes?

Key Quote on Distributions From 401(k)s to IRAs

When you’re ready to take a distribution from your 401(k), ask the plan administrator for a copy of your most recent statement. Review it to determine whether you have any after-tax money in your account. If you do, you can instruct the plan administrator to send the pre-tax amount directly to your traditional IRA and the after-tax amount directly to your Roth IRA. If the plan cannot process two direct rollovers, you may request that the pre-tax amount be sent to your traditional IRA and the after-tax amount be distributed to you, allowing you to roll it into your Roth IRA within 60 days.

— Denise Appleby, CEO of Appleby Retirement Consulting Inc. and Morningstar Contributor

The Takeaway

Saving in a traditional IRA allows investment earnings to grow tax-deferred until withdrawals are made. Appleby explains that maintaining accurate records of after-tax contributions can help reduce unnecessary taxation. This guidance applies to investors whose traditional IRAs contain both pre-tax and after-tax money. Those whose IRAs consist entirely of pre-tax funds generally do not have after-tax basis to track.

Appleby recommends keeping copies of your tax returns, Forms 5498, which report IRA contributions and certain other IRA activity, and Forms 1099-R, which report distributions from retirement accounts. These records can help your tax preparer correctly report distributions and determine the taxable and non-taxable portions of your IRA withdrawals.

The IRS requires taxpayers to use Form 8606 to report nondeductible traditional IRA contributions and to calculate the taxable and non-taxable portions of certain distributions and Roth conversions involving after-tax basis. Form 8606 serves as an important record that helps reduce the likelihood that the same after-tax dollars will be taxed more than once. This can be especially valuable for PepsiCo employees who have rolled retirement plan assets into a traditional IRA over the course of their careers.

If you have questions about how IRA distributions may affect your retirement strategy, The Retirement Group can help you better understand your retirement planning options. To learn more, call (800) 900-5867 to speak with a financial professional.

More From Morningstar on IRA Distributions and Tax Planning in 2026

Appleby describes Form 8606 as an important tool for helping taxpayers reduce the possibility of double taxation. When someone makes a nondeductible contribution to a traditional IRA, that contribution is reported on Form 8606. If the individual later takes a distribution or completes a Roth conversion involving after-tax basis, the updated Form 8606 is used to determine the taxable and non-taxable portions based on the taxpayer's historical records.

Sources:

1. Appleby, Denise. 'IRA Distribution and Tax Planning Articles.'  Morningstar , Morningstar, Inc.,  https://www.morningstar.com . Accessed 29 June 2026.

2. Financial Industry Regulatory Authority (FINRA).  Traditional IRA Basics . FINRA Investor Education Foundation,  https://www.finra.org/investors . Accessed 29 June 2026.

3. Internal Revenue Service.  Instructions for Form 8606 (2025): Nondeductible IRAs . U.S. Department of the Treasury, 2025,  https://www.irs.gov/instructions/i8606 . Accessed 29 June 2026.

4. Internal Revenue Service.  Publication 590-B (2025): Distributions from Individual Retirement Arrangements (IRAs) . U.S. Department of the Treasury, 2025,  https://www.irs.gov/publications/p590b . Accessed 29 June 2026.

5. U.S. Securities and Exchange Commission.  Individual Retirement Arrangements (IRAs).  Investor.gov,  https://www.investor.gov . Accessed 29 June 2026.