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Subject:  Re: Taking Control Date:  10/9/1998  8:09 AM
Author:  TMFPixy Number:  5952 of 88104

Greetings, Trillis, and welcome. You asked:

I've got a Roth IRA conversion account that I converted this year at a discount broker. The account has about $1300 in it. I have not made a contribution to this account this year. I also have a 401K from an old employer that is in a mutual fund. I want to direct the 401K money myself since I don't like the funds my old employer offers (no S&P index fund). Is it possible for me to transition my 401K funds into my Roth account or is my only option to roll my 401K into a traditional IRA? According to my broker, I can roll my 401K over into a traditional IRA account, I'll have to open another IRA, and afterwards transfer that money into my Roth. However, he was much too unsure about this process to make me comfortable. Is it possible for me to do this? Any guidance will be greatly appreciated.

Roth law permits a rollover to a Roth IRA from only two sources, a traditional IRA or another Roth IRA. Rollovers from a qualified retirement plan like a 401k are not permitted. Therefore, to get your money from a 401k plan to a Roth IRA, you must first transfer it to a traditional IRA. Once it's there, the very next day you can have it transferred to a Roth IRA should you so desire.

To ensure there is no tax problem in taking these steps, you should arrange with your broker and with your old 401k plan for a direct transfer to the traditional IRA. Both know how to do this and will guide you through the steps. I suggest you use the broker's money market fund or sweep account for the transfer to the tradional IRA. After the money is there, you should then instruct your broker to transfer it to a self-directed Roth IRA. Again, the broker knows how to do this. An administrative annoyance? Absolutely. But mandatory and easily accomplished if you follow those steps.


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