rollover to a Roth
Client has an old 401(k), wants to “roll it over” to a Roth IRA.
I assume this must be a two-step process, first roll it over to a rollover IRA, then convert the rollover IRA to a Roth IRA?
Thank you.
Client has an old 401(k), wants to “roll it over” to a Roth IRA.
I assume this must be a two-step process, first roll it over to a rollover IRA, then convert the rollover IRA to a Roth IRA?
Thank you.
Permalink Submitted by Alan - IRA critic on Wed, 2013-05-01 18:17
Client can either do a direct rollover to the Roth IRA or to the TIRA first and then convert from there.If there are after tax contributions in the 401k plan and no basis in the TIRA, then rolling directly to the Roth IRA will produce a lower tax bill since it avoids the TIRA pro rating on Form 8606. Either way, the client can still recharacterize all or part of the Roth rollover if he chooses. Recharacterization would go to a TIRA, not back to the 401k plan.