401K to Roth IRA in 2013
I’m 73, taking RMD’s and I have a 401K plan to which I am still contributing. Concern with the current Washington uncertanity about future sources of income, I’m wondering if it might be better to roll the 401K over to a Roth IRA, and if that is even possible. Can I streach out the taxes or all due at once.
Gene
Permalink Submitted by Alan - IRA critic on Tue, 2013-01-08 16:48
You should check with your plan to see how much of your 401k balance can be distributed while you are still working. Even if the plan allows rollovers to a Roth option within the plan, if you can take a distribution it is better to roll to a Roth IRA rather than the Roth 401k option because a Roth 401k rollover from the pre tax account cannot be recharacterized if you wanted to.In addition, you should not convert if your taxes on the conversion are higher than what you expect after you retire. Since you are probably also receiving SS benefits in addition to salary, your taxes on a conversion may be too high to convert very much in a single year. And if you do convert an amount, all the income must be reported and is taxable in the year converted. There is no stretch on the taxes, such as was the case in 2010. Finally, you probably do not have to take 401k RMDs while still working for the sponsoring company, but if you roll to a TIRA first, you must take your TIRA RMD before converting if you had a TIRA balance on 12/31/2012.