Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Rollover 401K to a Roth?
Old 09-28-2013, 07:48 PM   #1
Recycles dryer sheets
SteveNU's Avatar
 
Join Date: Feb 2010
Posts: 313
Rollover 401K to a Roth?

My sons girlfriend asked me a question about rolling her 401k into a IRA. She says the place where she is working is discontinuing their 401K and they need to open an account to roll it into. I don't have a lot of details but wanted to throw the question out there. I was wondering if it would be possible to roll it into a Roth IRA, she is only 24 right now.
__________________

__________________
SteveNU is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-28-2013, 08:29 PM   #2
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Posts: 3,862
Probably, though a tIRA could also just be a step along the way. Depending on the size of the rollover, she might not want to roll it all into a Roth if that puts her in a higher tax bracket. It would all count as regular income. A rollover into a tIRA would be tax free, with a little care. Then she can portion it out into a Roth if that makes sense. Given a low income now, it might make sense to consider the Roth.
__________________

__________________
Animorph is offline   Reply With Quote
Old 09-28-2013, 08:55 PM   #3
Recycles dryer sheets
SteveNU's Avatar
 
Join Date: Feb 2010
Posts: 313
She probably only makes $20 to $25,000 a year and only has about $2,000 in the account.
__________________
SteveNU is offline   Reply With Quote
Old 09-28-2013, 09:14 PM   #4
Thinks s/he gets paid by the post
David1961's Avatar
 
Join Date: Jul 2007
Posts: 1,074
She should be able to either transfer the amount into a regular IRA or convert it to a Roth IRA. If she converts to a Roth IRA, her taxes will probably increase, depending on the amount that is in the 401k and her tax rate.
__________________
David1961 is offline   Reply With Quote
Old 09-30-2013, 01:00 AM   #5
Thinks s/he gets paid by the post
Rustward's Avatar
 
Join Date: Apr 2006
Posts: 1,572
She probably wants a traditional IRA for the rollover. Conversion to a Roth after the rollover is probably a good move for a young person. Given the information you presented, this would likely be the best path for her to take.
__________________
Rustward is offline   Reply With Quote
Old 09-30-2013, 05:12 AM   #6
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,330
Call Vanguard on her options. She can definitely roll it over to an IRA and from there to a Roth. I don't know if it can be done in one move.
__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
2B is offline   Reply With Quote
Old 09-30-2013, 10:05 AM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,396
I think it has to be two moves - one from 401k>tIRA and then from tIRA to Roth IRA - but Vanguard can tell her for sure.

She needs to do the first move. The second is optional. She can do a projected tax return for 2013 and then add in the $2k Roth conversion and see what the tax cost is. If the tax cost isn't very much, then it is probably worth doing in the long run.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 09-30-2013, 10:34 AM   #8
Dryer sheet aficionado
 
Join Date: May 2013
Posts: 28
These days, it should be able to be done in one move, if she wants to.

http://www.irs.gov/pub/irs-drop/n-08-30.pdf
__________________
Mike Piper is offline   Reply With Quote
Old 09-30-2013, 10:50 AM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,396
Cool. I guess the advantage of doing it in two moves is you could chose to do it when convenient or in stages if you want.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 09-30-2013, 01:00 PM   #10
Moderator
Alan's Avatar
 
Join Date: Jul 2005
Location: Eee Bah Gum
Posts: 21,076
Quote:
Originally Posted by pb4uski View Post
Cool. I guess the advantage of doing it in two moves is you could chose to do it when convenient or in stages if you want.
Or when the market falls. We haven't done our ROTH conversion this year. If the market drops a lot over the budget and/or debt ceiling decisions then I'll take the opportunity to do this year's rollover. Using Turbotax for tax estimates I know what $ amount I want to convert, and if it happens to be at a much lower NAV price then a larger % of the IRA gets converted.
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Now it's adventure before dementia
Alan is online now   Reply With Quote
Old 09-30-2013, 01:11 PM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,396
So you are a market timer after all. I never would have guessed that.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 09-30-2013, 01:13 PM   #12
Moderator
Alan's Avatar
 
Join Date: Jul 2005
Location: Eee Bah Gum
Posts: 21,076
Quote:
Originally Posted by pb4uski View Post
So you are a market timer after all. I never would have guessed that.
Guilty as charged
__________________

__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Now it's adventure before dementia
Alan is online now   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


 

 
All times are GMT -6. The time now is 02:12 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.