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I am disabled, and as I understand it, therefore my 401K funds are available to me for distribution without penalty. I am no longer eligible to contribute to the 401K plan or gain the benefits of employer matching 401k funds. The plans available to me through the employer chosen investment options do not even match an S&P index fund.

I believe it would be FOOLish to move this money into a Roth IRA, where I can self-direct the investment of these funds.

My income is not over the Roth IRA limits.

I will be 59 1/2 in October 2000.

I've read all your articles and looked at several other sites for Roth info.

I'd like you to review the steps I intend to take and my understanding of their consequences and tell me if I have overlooked or misunderstood anything.

Step 1. I rollover my 401K to a traditional IRA at my chosen brokerage (this has no tax consequences, but allows me to get ALL the money from the 401K into a single IRA, which I could NOT do if I withdrew the 401k money. I must rollover to a traditional IRA first because rollovers from 401Ks to Roth IRAs are not allowed. I must rollover ALL 401K funds into a SINGLE traditional IRA; I am not allowed to split it into more than one IRA account)

2. I convert the traditional IRA to a Roth IRA (at this time I must pay taxes, at my current tax rate for the entire amount ... approximately $30,000 ... at which point this money, now in the Roth IRA MAY be withdrawn freely with no penalties or taxes once I am 59 1/2, even if the 5 years has not elapsed, although any profits made on the initial funds may NOT be withdrawn until the full five years are up).

3. Once the conversion to Roth IRA has taken place, I can invest the funds anyway I want within the account and all profits are tax-free; losses may NOT be used as tax deductions).

Thanks for your help.

Harp Conn
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