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Investing/Strategies / Retirement Investing
|Subject: Re: 401(k) to IRA rollover question||Date: 7/8/1999 9:07 PM|
|Author: bacon||Number: 11850 of 77871|
<<It seems to me that the money should be directly sent to the broker to avoid any penalties, but how can I make that happen without an account set up yet?>>
This part is so easy it seems too good to be true--but it's in the brokers' interest to keep this sort of thing this easy. Have your new broker send you the forms for opening an account and for effectng a direct transfer. Fill them out and send them back to your new broker. They'll take care of the rest. Expect 3-6 weeks (typically) elapsed time from when you send back the forms before your money actually arrives.
<<Secondly, it was suggested to me to later convert that transferred money to a Roth IRA. Is that something that should be considered?>>
Always worth considering, but it's your decision. Some factors to consider:
Roth: has tax free withdrawals after you've met the criteria for withdrawing; has favorable (compared to traditional IRA) estate treatment; the converted amount, to the extent it was tax-sheltered going in, or represents the tax-sheltered growth, represents an income increment, the income tax on which is due in its entirety with the rest of your income tax for the year in which the conversion occurred.
Traditional IRA: absent the estate considerations, is generally (not always, just almost so) a better deal if you expect to retire to a lower tax bracket than you're in now. Tends to be a wash if you retire to the same bracket; Roth tends to be better if you retire to a higher bracket.
For all comnbinations, weigh the estate treatment against the other bennies/losses.
Hope this helps
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