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Old 05-09-2011, 01:08 PM   #21
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The same reasoning holds true for the 401(k) versus Roth debate.

You may be able to move your 401(k) to a rollover IRA (not a rollover Roth IRA) and not pay taxes now.

However, if you will have to do a backdoor Roth in the future, you should just leave the money in the new 401(k). So unless the new 401(k) has lousy funds with high expense ratios, keep the money in the 401(k).

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Old 05-13-2011, 02:45 PM   #22
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Originally Posted by kpunjabi View Post
Should I move 401k account #2 to the Roth (and pay taxes now), or move it to Fidelity (where 401k account #1 already resides)?
If you have after tax money available to pay the conversion taxes, and you are already hitting both your 401k and IRA contribution limits, and you want to shelter more money in tax advantaged accounts, then converting to a Roth effectively increases you tax advantaged savings.

So do it.

Unless, you want to preserve the 401k's somewhat better protections against creditors, or you think you will have an opportunity to convert later at a lower tax rate.

Originally Posted by kpunjabi View Post
2. Can I expect to be in a low expected taxable income in retirement? Is the 401K taxes based on your taxable income at retirement? Or is it taxed based on your taxable income during an average of N years prior to retirement (to offset people that 'cheat' by intentionally working part time 1 year prior to retiring)
You will owe taxes when you withdraw money from a traditional IRA or a traditional 401k. You are taxed on the amount you withdraw. That amount is treated as income, like the income from say a bank saving account. The more you withdraw, the more income you have, the more taxes you pay.

Of course, given that you are currently 32, tax laws are likely to have changed by the time you actually withdraw the money.

Disclaimer: I'm not a CPA or a lawyer, these statements are only my layman's understanding.

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