Hello All,This is my first post to this board. I 've been reading it for some time and learned quite a bit. I have a question regarding rolloing over money from a 401K to a Traditional IRA which I would like to convert to a Roth IRA. My old company was purchased by a newly formed company (which does not have a 401K plan). I need to transfer the funds from my 401K to a personal retirement account. I have about $8,000.00 in the 401K and would like to ultimately roll it into a self directed Roth IRA with TD Waterhouse. I have a traditional IRA with Legg Mason in their Valued Trust Fund. According to the paper work from the old company I have to roll over into a traditional IRA.Can I open a Traditional IRA with TD Waterhouse (where I already have a taxable account, not an IRA) and then convert it to a Roth? I think if I were to do something like this now would be the time as the amount is relatively small. I'd like to have both a traditional and a roth IRA as a way to hedge my bets regarding the taxes during retirement. I make make about $34,000.00 per year and don't have high hopes of any great leaps in income before retirement.Thanks for your thoughts.Regards,sherry
Sherry,You seem to know what you are doing. I have both traditional and Roth IRAs because, like you, I don't know what my tax situation will be. Just make sure that you figure out the extra tax you will owe when you convert from the traditional IRA to the Roth so you won't be surprised next April. Barbara
Thanks Barbara. Sometimes it helps to have a non-interested party weigh in. Thanks for the reinforcement. It's helpful to have a second opinion when you're a little nervous about your decision.Sherry
Sherry,I've converted 401(k) - TIRA - RIRA twice. The first TIRA-RIRA allowed me to take the tax hit over 4 years, a feature that was not available the 2nd time around, so I completed a new W-4 with my employer asking for an additional $20 tax to be withheld per pay period (weekly) for the remainder of the year. You could pick a $ amount you're comfortable with and if you sit down and look at your daily spending habits, you'd be surprised where you can find that $5, $10 or $20.You can be frugal without being miserly! And Suze Orman gives the following examples: - Join a library for reading materials for your commute instead of buying daily newspapers and magazines (you can always borrow a paper at work or read it online);- 'brown-bag' 1 or 2 days per week- wait until you get to work for the cup o' joe (no deli or Starbucks coffee);- then there's Coinstar. You can find one at http://www.coinstar.com/coinstar2/cswebframe.nsf/GoHome. You'd be amazed how much loose change you build up over a week.Niall
Niall,Thanks for the advice about rolling it over in chunks instead of all at once. I hadn't know that was an option.I contribute the max to my TIRA now and contributed to my company's 401K plan. I will continue to max the IRAs. When the company offers a new 401K I will also contirbute to that at least up to the match while continuing to max out the IRAs. Until the 401K is in place I intend to put the money I had been contributing into my brokerage account which I use for long term savings.Sherry
Sherry,a bit late in replying ... couldn't find the original thread.I should clarify that my rollovers were from 2 separate 401(k) plans, one I converted to a TIRA in '96, which I converted to a RIRA in Dec 98 (I think - it was the last year you could spread the tax hit over 4 years). I converted the 2nd in '99, to a TIRA and immediately to a RIRA.Niall
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |
BATS data provided in real-time. NYSE, NASDAQ and NYSEMKT data delayed 15 minutes.
Real-Time prices provided by BATS. Market data provided by Interactive Data.
Company fundamental data provided by Morningstar. Earnings Estimates, Analyst Ra