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I've seen more cons than pros on this idea but it seems in our case this might not be a bad idea. Scenario: DH retired last year but I continued to work until the end of September. I took a few months off but started a new job last month making much less (less stressful too) than I did previously and they have a Roth 401K option. DH isn't pulling anything from his retirement or SS because we honestly don't need it so it's just my salary paying the bills and it's more than enough since we have no debt (house/cars/etc are all paid off). Our tax bracket will be the lowest it will ever be this year and the Roth can grow tax free until we need it so I'm thinking rolling my old 401k into a Roth 401K might not be a bad idea. We'll just pay the tax on it and get it over with. Thoughts?
How much is the old 401k? I think you mean conversion not rolling over the monies. If I was going to do it I’d probably roll the old 401k to an ira and then do Roth conversions to a Roth IRA in pieces or in whole depending on the tax situation. I’d also consider fully funding your current 401k up to the max with Roth monies
How much is the old 401k? I think you mean conversion not rolling over the monies. If I was going to do it I’d probably roll the old 401k to an ira and then do Roth conversions to a Roth IRA in pieces or in whole depending on the tax situation. I’d also consider fully funding your current 401k up to the max with Roth monies
It's only 230k. It's actually considered a rollover from my understanding since I'd move my 401K from one employer to the Roth 401k of the new employer and of course all future contributions would go into that Roth. Why would I roll it into an IRA and then convert it to a Roth when I can just roll it into my new employers Roth 401k and be done with it? From a tax perspective, this year would be the best year ever to do something like this in our case because our tax bracket will be the lowest it's ever been or ever will be so no need to move it in pieces. Just do it all at once. Thank you for your thoughts on it.
It's only 230k. It's actually considered a rollover from my understanding since I'd move my 401K from one employer to the Roth 401k of the new employer
The funds would have to go through a conversion. You’d be rolling from the old 401k to the new one and then converting the funds
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Why would I roll it into an IRA and then convert it to a Roth when I can just roll it into my new employers Roth 401k and be done with it? From a tax perspective
Greater flexibility with investment options. I can’t really think of too many advantages of rolling into your current plan. I’d rather be able to invest in anything I wanted instead of being constrained by your employer’s decisions
I don't think you can go from old 401k to Roth 401k, without going into the new Trad 401k first.
Don't forget that the taxes due must come from other sources/monies.
Also, doing it all at once (230k), you'll still be in a lower bracket than you would be?
And, if you get any new company match that may have to go into the new Trad 401k anyway. I don't know if company match money can go into the Roth 401k. Maybe it can but I now at least one employer where their match doesn't go into its Roth 401k only its Trad 401k.
I don't think you can go from old 401k to Roth 401k, without going into the new Trad 401k first.
Don't forget that the taxes due must come from other sources/monies.
Also, doing it all at once (230k), you'll still be in a lower bracket than you would be?
And, if you get any new company match that may have to go into the new Trad 401k anyway. I don't know if company match money can go into the Roth 401k. Maybe it can but I now at least one employer where their match doesn't go into its Roth 401k only its Trad 401k.
Employer matching always goes pretax. You could convert it to Roth 401k after vesting though
The funds would have to go through a conversion. You’d be rolling from the old 401k to the new one and then converting the funds
Greater flexibility with investment options. I can’t really think of too many advantages of rolling into your current plan. I’d rather be able to invest in anything I wanted instead of being constrained by your employer’s decisions
I don't think you can go from old 401k to Roth 401k, without going into the new Trad 401k first.
Don't forget that the taxes due must come from other sources/monies.
Also, doing it all at once (230k), you'll still be in a lower bracket than you would be?
And, if you get any new company match that may have to go into the new Trad 401k anyway. I don't know if company match money can go into the Roth 401k. Maybe it can but I now at least one employer where their match doesn't go into its Roth 401k only its Trad 401k.
Yes, you can go from a 401K to a Roth 401k directly and I have the money to pay the taxes. Yes, I'll still be in the lower tax bracket because the 230k is not income if you roll it into a qualified retirement plan, which it is. My tax bracket will be based upon my earned income for the year. The company does match my Roth 401k contributions.
Yes, you can go from a 401K to a Roth 401k directly and I have the money to pay the taxes. Yes, I'll still be in the lower tax bracket because the 230k is not income if you roll it into a qualified retirement plan, which it is. My tax bracket will be based upon my earned income for the year.
Your 230k will be taxed, it will be added to your income for the year. There’s no tax free way to do what you are speaking of. 401k to 401k isn’t taxes but 401k to Roth 401k will be taxed. You are going to owe at least 50k easily
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The company does match my Roth 401k contributions.
The match will not go into the Roth 401k bucket, it will go in the pretax bucket
Your 230k will be taxed, it will be added to your income for the year. There’s no tax free way to do what you are speaking of. 401k to 401k isn’t taxes but 401k to Roth 401k will be taxed. You are going to owe at least 50k easily
The match will not go into the Roth 401k bucket, it will go in the pretax bucket
The 230k will NOT be taxed as earned income at all because I would be doing a direct rollover into a qualified retirement account. I will have to pay taxes on the amount but not as "earned income". My tax bracket for the year will be based solely on actual "earned income" and will not include the 230K. My earned income will keep my tax bracket very low so I'll owe 30K on the 230k which is far less than I'd have to pay when my tax bracket goes up in retirement.
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