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Subject:  Re: 401(k) Help Date:  11/16/1998  2:28 PM
Author:  zgriner Number:  6627 of 88077

Congrats on the new job!!

...I would like to know if I can roll my 401(k) money (about $11,000 I think) into my Roth IRA...

Rolling 401k money into a Roth IRA has to be done in two steps:
1) Roll the 401k into a traditional rollover IRA. Make sure the money is transferred directly from your 401k custodian to your IRA custodian. If your 401k custodian insists on sending the check to you, have the check made out to the IRA custodian, to indicate that you are not taking direct possession of the money.
2) Once the money is transferred, convert the money in the rollover IRA to the Roth IRA. Assuming you convert $11,000 this year and your tax bracket is 28%, you have the option of paying a $3080 tax this year, or $770 this year and each of the next 3 years. This money must come out of your pocket, you can't use the IRA money to pay it. You must also be making less than about $100,000 for this year; the converted money is not included.

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