How to cancel 401-K and roll into Roth

Submitted by David Smiler on Sat, 2008-02-09 14:22

Hello.

I contribute to a 401-K through my employer.

Last year, I was not eligible to contribute, but did roll over a balance from a prior employer, and opened a Roth IRA independent of that rollover.

I would like to know if it is legal (without penalties, etc.) to cancel my 401-K and roll the balance into my existing self-directed Roth IRA. There are just too few investment choices in the 401-K, and the funds have not been performing well.

Any assistance would be appreciated.



Submitted by Al Fry on Sat, 2008-02-09 16:04

Are you the employer?



Submitted by David Smiler on Sat, 2008-02-09 21:03

I am the employee of a firm which offers a 401-K. I am presently contributing to both the company-sponsored 401-K as well as my Roth IRA (not employer sponsored).

Thanks, and looking forward to hearing your insights.



Submitted by Al Fry on Sat, 2008-02-09 23:19

You cannot “cancel” your 401(k). You may want to check to see if the plan allows in-service distributions. Also check out the matching contributions (if any) from the employer. If they are substantial (e.g. 50%+), its normally wise to contribute at least up to the match.



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