What's the best way to go about finding a Roth? I have funds from a 401k from a company I don't work for anymore. I have to be with my current company for a year before I can transfer that balance in and start contributing. I've been wanting to start a Roth anyway and figured I may as well transfer these funds into that since they're sitting in a very low yield IRA right now. Suggestions on how to go about this?
Post by illgetthere on Feb 10, 2014 10:39:59 GMT -5
401k money is pre-tax while a Roth is post-tax. I would roll your 401k money over, but I would not try to roll it into a Roth. I'm confused though. Is the previous employer money in a 401k or is it in an IRA?
Remember that 401K money is generally pre-tax (unless your old 401K was a Roth 401K). So if you want to roll that old converted (presumably pre-tax) IRA into a Roth, you will effectively be increasing your income by the amount of the IRA this year and paying income taxes on that amount.
There are still reasons to do that sometimes, but something to consider.
Whoever has the Rollover IRA today can walk you through the process of opening up a Roth IRA and getting the money into it.
401k money is pre-tax while a Roth is post-tax. I would roll your 401k money over, but I would not try to roll it into a Roth. I'm confused though. Is the previous employer money in a 401k or is it in an IRA?
Oh. Hmmm.
What should I roll the 401k money into? It is a 401k. I got a letter from the 401k company saying they had rolled it over into a 'safe harbor' IRA.
Remember that 401K money is generally pre-tax (unless your old 401K was a Roth 401K). So if you want to roll that old converted (presumably pre-tax) IRA into a Roth, you will effectively be increasing your income by the amount of the IRA this year and paying income taxes on that amount.
There are still reasons to do that sometimes, but something to consider.
Whoever has the Rollover IRA today can walk you through the process of opening up a Roth IRA and getting the money into it.
What if I don't want to pay taxes on it? Is there a different kind of IRA that I can move the money into that will get me a better yield while I'm in this waiting period?
Remember that 401K money is generally pre-tax (unless your old 401K was a Roth 401K). So if you want to roll that old converted (presumably pre-tax) IRA into a Roth, you will effectively be increasing your income by the amount of the IRA this year and paying income taxes on that amount.
There are still reasons to do that sometimes, but something to consider.
Whoever has the Rollover IRA today can walk you through the process of opening up a Roth IRA and getting the money into it.
What if I don't want to pay taxes on it? Is there a different kind of IRA that I can move the money into that will get me a better yield while I'm in this waiting period?
It is a Rollover IRA. I would recommend Vanguard or someone similar. You can tell them that you want to rollover an old 401k and they will open the IRA for you. Once you get the account number, the payee information for the check and their address, call your old company's 401k people and give them the information. They will handle it from there. You can open a separate Roth IRA to start contributing to. I'm honestly not too sure about safe harbour IRAs, but I imagine it would work the same
Remember that 401K money is generally pre-tax (unless your old 401K was a Roth 401K). So if you want to roll that old converted (presumably pre-tax) IRA into a Roth, you will effectively be increasing your income by the amount of the IRA this year and paying income taxes on that amount.
There are still reasons to do that sometimes, but something to consider.
Whoever has the Rollover IRA today can walk you through the process of opening up a Roth IRA and getting the money into it.
What if I don't want to pay taxes on it? Is there a different kind of IRA that I can move the money into that will get me a better yield while I'm in this waiting period?
So it sounds like you are already in an IRA - they moved you into one. Now you need to look at the investment options within that IRA and see if there's something better to put your money in. I'd recommend a target retirement date fund if you want to be relatively hands-off.
If the IRA they converted you into doesn't have good options, call Fidelity or Vanguard or someone like that and have them help you move the money over. Once your account is there, you can invest in any fund they offer within that account. And none of those events should be taxable.
Remember that 401K money is generally pre-tax (unless your old 401K was a Roth 401K). So if you want to roll that old converted (presumably pre-tax) IRA into a Roth, you will effectively be increasing your income by the amount of the IRA this year and paying income taxes on that amount.
There are still reasons to do that sometimes, but something to consider.
Whoever has the Rollover IRA today can walk you through the process of opening up a Roth IRA and getting the money into it.
What if I don't want to pay taxes on it? Is there a different kind of IRA that I can move the money into that will get me a better yield while I'm in this waiting period?
Yes. I would open up a (traditional) Rollover IRA and move the old 401K funds there. Where is the money currently being held?
A Roth IRA is a separate issue. You can open one up (look at Vanguard, Fidelity, etc.) at the same firm, and contribute up to $5,500/year to it as long as your income is not over the limits.
What if I don't want to pay taxes on it? Is there a different kind of IRA that I can move the money into that will get me a better yield while I'm in this waiting period?
Yes. I would open up a (traditional) Rollover IRA and move the old 401K funds there. Where is the money currently being held?
A Roth IRA is a separate issue. You can open one up (look at Vanguard, Fidelity, etc.) at the same firm, and contribute up to $5,500/year to it as long as your income is not over the limits.
It's currently with 'Safe Harbour IRA'. But I haven't actually called and talked to them yet.
My 401k was being invested in Vanguard when I was with my old company, so I will call them and see what they have available to move those funds into and then open a separate Roth to contribute to in the meantime.