Direct 401k rollovers
In the January issue of Financial Planning, Ed said that 401k plan participants “can also do Roth conversions as long as they’re eligible to take a distribution from the plan, and the funds are eligible for rollover to an IRA. See if a plan allows in-service distributions, so funds can be converted now instead of after a client stops working.” Does this mean that penalty-free rollovers are now allowed for plan participants under 59-1/2?
Permalink Submitted by Alan Spross on Fri, 2010-01-15 03:02
Rollovers are always penalty free if the distribution is “rollover eligible”. This includes Roth conversions which are rolled over to a Roth IRA. But the plan must allow non hardship in service distributions and few do unless perhaps the employee has reached age 59.5. Each plan has it’s own guidelines with respect to whether an employee still working is eligible for a distribution.
Permalink Submitted by Robert Wright on Mon, 2010-01-25 20:04
Can you rollover after-tax and before-tax 401k balances to a Roth IRA?
If so, what does a participant need to watch out for when doing this?