Is it possible without early withdrawl penalty? I understand taxes would be due upon conversion.
If you move your 401k to a rollover IRA then convert that to a roth you wouldnt have any penalties just taxes.
I believe Roth are after-tax vehicles. No way you could roll pre-tax dollars into them without paying tax.
DarienHacker Wrote: ------------------------------------------------------- > I believe Roth are after-tax vehicles. No way you > could roll pre-tax dollars into them without > paying tax. The original poster was questioning whether or not you pay the 10% penalty. As long as you don’t try to pay the taxes out of the converted 401(k) assets you won’t pay a penalty. In other words if you have $100K in your 401(k) and convert it to a Roth you would not want the taxes on that $100K to come from the $100K. You have to pay the taxes from other sources to avoid the penalty.
No need to roll to a Traditional IRA first. You can now roll your 401k directly to a Roth IRA as long are willing to foot the tax bill associated with the conversion. Probably makes sense if you anticipate yourself being in a higher tax bracket when you will be withdrawing the money. No withdrawal penalty if you roll it to a Roth and pay the taxes.
Thanks. I have never heard of this before and wanted insight before I attempt a rollover like this. 401k to Traditional IRA is how this usually happens.
Any idea on what rate would be used? Meaning, if I’ve funded my 401k over a couple of years when I was in a ~28% bracket and decided to roll it in a year with substantially lower income (eg in MBA program and no income), would I pay taxes on $ amount rolled at my rate for that year or the years the income was earned.
good to do in a year when you are unemployed, if that is an option. Otherwise it goes in at your current marginal rate (or more, possibly)
KJH Wrote: ------------------------------------------------------- > Is it possible without early withdrawl penalty? > > I understand taxes would be due upon conversion. As mentioned above, 401k contributions are pre tax and cannot be withdrawn, without the 10% penalty and taxes, before 59.5. If you want to avoid the penalty try enrolling in 401K roth (tax advantage is if you think in future ur tax bracket is high, as distribution is tax free. However, you will still have to pay taxes when you roll over) or another IRA. check this link…the matrix…its helpful… http://en.wikipedia.org/wiki/401k_ira_matrix
Upon termination of employment, can be rolled to IRA or Roth IRA. When rolled to a Roth IRA taxes need to be paid during the year of the conversion. This was my issue. I wanted to know if it was worth looking into prior to calling the administrator etc.
KJH- Did you get that job at JSA?
I did not. It’s a punch in the gut getting a rejection after a final interview, but it happens. By the way, how did you know about that firm I interviewed at?
I connected a few dots and assumed that was the place.
Walleye, where are you at?
Bloomington but in two weeks I will be working in Plymouth. I went to school with apcarlson.
Walleye - Looks like your L3 studies have picked up a bit. I see you are frequenting AF now… how’s the studying going?
I went to the party school just east of where you two went. I live out just West of Plymouth. Nice to meet you Walleye.
ap- That and many other things picking up. Trying to plow through all of the CFAI books so I have a month or so before the test to review. kjh- You must take 55 into your work at Butler square then, correct? Ah, that party school…My sister went there and I know quite a few Huskies. Peace
I guess you could say I’m Southwest of Plymouth and I take 394 to Butler. One of the easiest commutes as the freeway exits into the parking ramp. I almost became a Jonnie after high school. The tuition bill was just too high for me. The party school was very affordable.
KJH and Walleye. Are you guys based in downtown Minneapolis?