Are you one of the 15 million Americans who has a 401(k) left behind with an ex-employer? Alternatively: Does your current company allow you to make “in-service” rollovers from its 401(k) to an individual retirement account? (Most employers do allow such rollovers for workers 59.5 or older, and a minority allow them for younger workers.)

Either way, you may have a tax-saving option you haven’t heard about: converting an old 401(k) or part of a current one into a Roth IRA. Despite much recent hoopla about the new rule allowing anyone to convert a traditional IRA into a Roth IRA, a recent Fidelity Investments survey found 55% of affluent folks with orphan 401(k)s didn’t realize they could convert them, too. As of Jan. 1 even taxpayers with income above $100,000 can do these conversions.

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The basics of a Roth conversion–whether from an IRA or 401(k)–are the same. you declare the old account taxable, pay any income taxes due on pretax contributions and earnings, and invest the funds in a Roth, where all future growth is tax free. (In many cases the money can stay in the same securities without being cashed out and reinvested.) this maneuver often makes sense if you can pay the tax from nonretirement funds, expect your tax rate to be the same or higher in retirement and won’t need the funds for a decade or more. A conversion is particularly attractive as a way to leave an income-tax-free inheritance to your kids or grandkids.

But converting from a 401(k) to a Roth can be an even bigger tax win than converting from one IRA to another–if your old or current 401(k) includes aftertax contributions, as some do. Federal “nondiscrimination” rules limit how much some higher-paid workers can put away pretax. So 5% of those earning more than $100,000 contributed aftertax money to their 401(k)s last year, according to a Hewitt Associates ( HEW – news – people ) survey.

Here’s where a 401(k) conversion has an edge: If you have multiple IRAs and are converting just some of the money, Internal Revenue Service rules say the amount you convert must be drawn proportionately from the pretax and aftertax dollars in all your IRAs. But if you convert a 401(k) directly into a Roth IRA, you disregard your other 401(k)s and IRAs in determining the percentage of the conversion that’s taxable. Say you have $100,000 in pretax IRAs and $20,000 in an old 401(k), with half of that aftertax contributions. you can roll the whole $20,000 401(k) into a Roth, recognizing just half–$10,000–as income. By contrast, if you had previously rolled the $20,000 into a traditional IRA, the tax rules would treat you as having one big $120,000 IRA, with $10,000 in aftertax contributions. So 11/12 of any conversion would be taxable.

If you can tolerate added complexity and some uncertainty, there are even ways to convert only that $10,000 in aftertax money to a Roth. On his website, www.fairmark.com, Chicago tax lawyer Kaye Thomas describes five strategies advisors have promoted for doing this. he says two–including the simplest one of withdrawing only aftertax dollars from a 401(k)–have been nixed by the IRS, two others “appear to work” and a fifth is “problematic.” Thomas suggests taxpayers who want to try this get a tax pro’s help and also consider whether they might benefit from skipping these maneuvers and converting pretax dollars as well. “There are a lot of people who could benefit from conversions who aren’t doing them,” he observes.

So is your 401(k) eligible for conversion? If you’ve left the employer where you established a 401(k), you can almost always do what you want with it–move it to a new employer’s 401(k), cash it out, roll it into a regular IRA or convert it directly into a Roth IRA.

As for a 401(k) at your current job, the answer varies. once you reach age 591/2 the tax law permits you to roll all your money from a current employer’s 401(k) to an IRA without penalty. Employers don’t have to allow this in-service rollover, but most do, even if they don’t advertise the option. (Some allow you to roll your own contributions but not their match or profit-sharing contributions.)

A lucky minority of younger workers also have an in-service rollover option. The Profit Sharing/401(k) Council reports that 29% of big companies have adopted an IRS-blessed provision that allows younger folks to do in-service rollovers of their aftertax, employer-match and profit-sharing contributions, as well as any money rolled over from a previous plan, but not of their own pretax contributions. (Unfortunately, Thomas warns, the IRS treats the distribution as if pretax contributions were distributed, too.) Frank Palmieri, an employee-benefits lawyer in Princeton, N.J., says small companies have started amending their plans to allow this, too. “Somebody high up the food chain has to come up to human resources and say, ‘I want this done,’” he observes. So it helps if the boss himself wants to do a Roth rollover.

Rothify Your 401(k)