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I will be switching to a new company soon, and I want to roll over my ROTH 401K at my old company to my ROTH IRA. I called Fidelity and they said I would have to pay taxes on any capital gains on the ROTH 401K if I do this! The market was good to me last year, so that's a lot of taxes! This is ludicrous, isn't money in a ROTH supposed to grow tax free? Anyway, she told me that the only way I could avoid this would be to keep my ROTH 401K at my old employer until I am 59. I am 23 right now, with 40K+ in my ROTH 401K. Is what she said true? Would I have to keep my 401K at my old employer until I am 59? Are there penalties for that? That is over 35 years from now!
I have had a 401k account from an old employer (not a Roth, just a regular 401k) for almost 20 years now. I simply have not been motivated to move it into an IRA - unless your previous employer's investment choices are really bad, not certain why you would need to move the account. Just update your address with the old employer's investment outfit (you don't really have to deal with your previous employer as such, at least I don't)
I can see how a guy would not want to have 7 or 8 different 401k accounts floating around, but having 2 does not bother me much.
All that said, agree with wheelsup - sounds like the person you talked with at Fidelity does not really understand your situation.
Right, the employer match is pre-tax and goes into a separate account, which is why you would pay tax on THAT portion of it if you roll the Roth 401k to a Roth IRA. If there's no employer match, you pay no tax on the rollover.
If you do a direct rollover you should not have any tax consequences. If you took a disbursement and then put it into another Roth you would have to pay tax on the gains and a penalty if you are not 59 1/2. I think you talked to someone at Fidelity that didn't know what they were talking about. My GUESS is that he missed the ROTH part of the 401k and was thinking 401K to Roth where you WOULD have to pay tax on it.
If you took a disbursement and then put it into another Roth you would have to pay tax on the gains and a penalty if you are not 59 1/2.
Well, I believe there's a 60-day window in which to roll that disbursement to a Roth IRA and then tax and a penalty would not be owed. However, if the check is made out to you (rather than to the new custodian), then 20% will be withheld, which can be problematic. Moral of the story: Do a direct rollover.
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