401k Money to Roth IRA
Hi:
I have a client who recently terminated service from her employer. She has a 401k. She also has a Roth IRA. Can we roll the 401k money directly to her Roth IRA? Thank you.
Hi:
I have a client who recently terminated service from her employer. She has a 401k. She also has a Roth IRA. Can we roll the 401k money directly to her Roth IRA? Thank you.
Permalink Submitted by Alan - IRA critic on Mon, 2015-06-01 20:16
Yes, but the pre tax amount of the rollover which is likely most or all of the balance will be taxable. However, if client cannot pay or does not like the tax bill, part or all of the Roth rollover can be recharacterized to a TIRA account by the tax due date. This provides a safety valve since it normally is not beneficial to roll large amounts to a Roth IRA in a single year. This can also be addressed by doing a direct rollover of part of the balance to a TIRA and the rest to a Roth IRA, and also be waiting for a low income year to do the Roth rollover. If client terminated in May and does not go back to work this year, this would be a fairly low income year.