roll over advice

[wrichards58]

my husband will be 591/2 in April.... he has 350,000 in 403b.. should we roll it over into a roth?.... our 403b is with Lincoln alliance thank

 

[Alan]

my husband will be 591/2 in April.... he has 350,000 in 403b.. should we roll it over into a roth?.... our 403b is with Lincoln alliance thank

Roll it over into a regular IRA first.

If you roll it all into a Roth you will be taxed on all $350,000 which is not good.

 

[wrichards58]

Roll it over into a regular IRA first.

If you roll it all into a Roth you will be taxed on all $350,000 which is not good.

our plan is to roll into a reg ira.. then in our bridge years at age 63 where our income is lower we plan to roll some in roth staying in our tax bracket

 

[pb4uski]

our plan is to roll into a reg ira.. then in our bridge years at age 63 where our income is lower we plan to roll some in roth staying in our tax bracket

That sounds more sensible than your OP.

 

[Alan]

our plan is to roll into a reg ira.. then in our bridge years at age 63 where our income is lower we plan to roll some in roth staying in our tax bracket

Perfect - exactly what we are in the process of doing. Your OP sounded like you were asking if you should do it immediately.

Tax prep software (Turbotax, TaxCut, TaxAct etc) is great for planning how much you should convert each year.

 

[wrichards58]

Perfect - exactly what we are in the process of doing. Your OP sounded like you were asking if you should do it immediately.

Tax prep software (Turbotax, TaxCut, TaxAct etc) is great for planning how much you should convert each year.

with our income now.. if we rolled any money to roth it would put us in another tax bracket so we will need to wait.... the question how much should we roll over to an IRA... we have a reg IRA with vandguard

 

[pb4uski]

with our income now.. if we rolled any money to roth it would put us in another tax bracket so we will need to wait.... the question how much should we roll over to an IRA... we have a reg IRA with vandguard

Why not the whole thing? That's what I did because the IRA (mine is VG as well) offered more investment choices and lower ongoing costs. I will then do Roth conversions as I can staying in the 15% bracket.

Also, once you have that much at VG you will probably be eligible for a free financial planning exercise (if you haven't already done that) and free TurboTax.

 

[Alan]

Why not the whole thing? That's what I did because the IRA (mine is VG as well) offered more investment choices and lower ongoing costs. I will then do Roth conversions as I can staying in the 15% bracket.

Also, once you have that much at VG you will probably be eligible for a free financial planning exercise (if you haven't already done that) and free TurboTax.

That is exactly what I did when I retired. Rolled over all my 401k to VG. Each year I do some Roth conversions.

 

[jebmke]

The only caveat I would add is to check if there are any unique state issues related to rollovers. In MD (my state), distributions from qualified plans (401(k), 457 ...) qualify for a pension exclusion for some people 65 and older (depends on your total income). IRA distributions do not qualify. I have done taxes for seniors who have previously rolled 401(k)s to IRAs only to lose their pension exclusion in MD.

 

[pb4uski]

Good point. Ouch!

 

[Rustward]

my husband will be 591/2 in April.... he has 350,000 in 403b.. should we roll it over into a roth?.... our 403b is with Lincoln alliance thank

Somebody is probably going to think I am being really picky here, but my comment is meant to be constructive.

When you say roll or rollover, that generally refers to moving money from a 401(a or k) or 403(b) or other tax deferred account to a traditional IRA sometimes called a rollover IRA.

Moving money from a traditional IRA to a Roth is called a conversion.

These are kind of keywords that have specific meanings. A rollover is not a taxable event, but a conversion usually is.

Sorry -- I just wanted to clear that up. I have already put on my Kevlar underwear.

 

[wrichards58]

Somebody is probably going to think I am being really picky here, but my comment is meant to be constructive.

When you say roll or rollover, that generally refers to moving money from a 401(a or k) or 403(b) or other tax deferred account to a traditional IRA sometimes called a rollover IRA.

Moving money from a traditional IRA to a Roth is called a conversion.

These are kind of keywords that have specific meanings. A rollover is not a taxable event, but a conversion usually is.

Sorry -- I just wanted to clear that up. I have already put on my Kevlar underwear.

ok so roll over to reg ira and then roth conversion.. right

 

[wrichards58]

That is exactly what I did when I retired. Rolled over all my 401k to VG. Each year I do some Roth conversions.

Alan , did you have a financial planner help you? what did you know to put your money into?

 

[pb4uski]

ok so roll over to reg ira and then roth conversion.. right

Right.

 

[pb4uski]

....what did you know to put your money into?

Vanguard financial planners can help you with that as it is very case specific.

Worst case, put it into the same types of investments it was in the 401k, but the transition is a good opportunity to reorganize your retirement portfolio.

 

[Alan]

Alan , did you have a financial planner help you? what did you know to put your money into?

I didn't use a planner for the rollover. I had my 401k set up in a similar AA to VG Target 2010 which is what I rolled it into.

I did have a dedicated VG person to help me do the rollover.

 

[Rustward]

ok so roll over to reg ira and then roth conversion.. right

Yes, but as Alan pointed out, spread your Roth conversions over several years to keep your taxes low.

 

[wrichards58]

Yes, but as Alan pointed out, spread your Roth conversions over several years to keep your taxes low.

that is what we are looking at.... with pensions a year total 67,000.. we will convert over to a Roth as much as we can to stay within the right tax bracket.
But should we roll over all his 403b into the IRA this spring

 

[Rustward]

You did not say if your husband is still working or not.

If he is still working, the employer must allow "in service rollovers" in the 403(b) plan. Some allow it, and others do not. You would have to check with the plan administrator.

If he is not working, then he can roll it over for sure.
I can't think of any reason not to roll it all over at one time. Then you can manage it in the IRA.

 

[wrichards58]

You did not say if your husband is still working or not.

If he is still working, the employer must allow "in service rollovers" in the 403(b) plan. Some allow it, and others do not. You would have to check with the plan administrator.

If he is not working, then he can roll it over for sure.
I can't think of any reason not to roll it all over at one time. Then you can manage it in the IRA.

yes they allow roll overs either outside or into their IRA account

 

[Animorph]

that is what we are looking at.... with pensions a year total 67,000.. we will convert over to a Roth as much as we can to stay within the right tax bracket.
But should we roll over all his 403b into the IRA this spring

If that's a question at the end, then there is no tax reason to split the rollover. It's only the Roth conversion that you have to do piecmeal.

 

[kaneohe]

If it is of any interest and depending on what your state offers or not, you
might want to consider whether (if your 403B plan is ERISA protected) keeping the 403B with its possibly greater creditor protection (state-dependent) has any value compared to the rollover into an IRA. CA, for example, doesn't have very good protection for IRAs. Don't know about your state.