Pay tax on 401K conversion now or at retirement?
My husband passed away in Sept. 2008 and we both have 401ks from former employers, as well as Roth IRAs. I have left everything in place and need advice on whether to convert his 401k into my Roth and perhaps also my 401k into my Roth. I don’t have income or contribute to any of these plans. Is it better to hold all at my current age of 53 or wait until I’m retirement age? I’m in the 10% bracket now and don’t anticipate having any income except from savings until I’m at least 60. At that time I will apply for his Social Secuity benefits as surviving widow. When would be the best time to convert? What are the rules?
Permalink Submitted by Alan Spross on Tue, 2009-11-10 18:12
You should consult a well respected local financial planner to assist you in developing a comprehensive plan to address the following needs:
1) How best to get the income you need prior to 59.5 without paying an early withdrawal penalty.
2) How to check for NUA potential in both the 401k accounts if there is highly appreciated employer stock, and how to take a qualified LSD if there is.
3) Whether you should convert at all, and if so how much and over what time frame. Taxes should come from other non retirement plan sources.
4) What other assets you have including any DB pensions, real estate, SS projections, other inheritances, debt level, legacy planning etc.
5) Any RMD requirements based on husband’s age at death, or if you maintain his accounts in inherited form when RMDs must begin.
This forum is not geared to the level of detail needed to properly tie everything together for you, and you have dozens of inter related variables to deal with here.
Meanwhile, be sure that you have named successor beneficiaries on his plans and updated the beneficiary statements on your own plans. Determine whether his Roth IRA defaulted to your ownership automatically under the agreement, or not.
Permalink Submitted by Tanya Walsh on Tue, 2009-11-10 19:58
Thank you so much for your detailed response. I will take this under advisement. I will look for an Ed Slott advisor in my area.
Tanya
Permalink Submitted by Bruce Steiner on Tue, 2009-11-10 23:21
This forum can be useful for general information, but not for specific legal advice. You may wish to consult with the lawyer who handled your husband’s estate, or the lawyer who does your estate plannig, or other tax/estates counsel.