converting a 401(k) to a Roth IR A
I am converting my son’s 401(k) to a Roth IRA. The 401(k) plan has both mutual funds and corporate stock. My questions are:
1. How do I convert the stock?
2. Should the stock be sold first?
3. Who sells the stock, the plan or my son?
4. Can we do a partial conversion, rolling over the mutual funds, and, leaving the
stock in the plan?
5. Anything else I should know?
Please advise. Time is of the essence.
Thank you,
Felix Fedor
[email protected]
Permalink Submitted by mk foss on Thu, 2012-12-13 17:53
Normally you would open a Rolth IRA account then request that the 401(k) assets be transferred to that account. If the Roth IRA receives assets in kind, stock and mutual funds can be transferred to the new Roth.The entire 401(k) plan need not be converted, the assets to be transferred can be selected from the plan.If the Roth does not accept the mutual funds or stock that the 401(k) holds, the assets to be transferred would be sold within the plan and the cash could then go to the Roth by a wire transfer or by a check made out to the Roth custodian.Many 401(k) plans do not allow inservice distributions, especially if the participant is under 59.5 – so unless there’s a separation from service, you may not be able to convert from the 401(l).It is possible to “recharacterize” a Roth conversion before October 15 of the next tax year, if your son wants to recharacterize the assets must be transferred to a traditional IRA. They cannot be returned to the 401(k) plan.