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Greetings, Amit, and welcome. You asked:

I have around $10k in my 401k with my company. I am planning to quit and go to grad. school this fall for 2 years.

I plan to rollover my 401k to a "rollover IRA" and convert this IRA to a Roth IRA in 2002 (when my income will be at a minimum). The taxes for the conversion will be financed by some other investments I have.

My questions are:
1. When I do a rollover from 401k to a traditional IRA, is there a specific time limit for after which the rollover IRA expires?

I have no idea what you're driving at with that question, but rollover/conduit IRAs don't "expire." At worst, they reach a point at your age 70 1/2 when you must begin to take money from them. For details on IRAs, see our IRA area at and IRS Publication 590 (Individual Retirement Arrangements) available for download at

2. If I convert from traditional IRA to a Roth IRA the next year i.e. 2002, will I be taxed based on my income from 2002 or 2001?

On conversion to a Roth IRA, the money in your traditional IRA will be added to your income for 2002. Your taxes will be based on your total tax situation in that year.

3. Can I convert this Roth IRA to a new 401k of my employer after 2 years assuming I don;t add anything to it?

No. Once the money has been converted to a Roth, it may not be transferred again to an employer's qualified retirement plan or to a traditional IRA. But money in a traditional IRA may be so transferred provided your new employer's plan will accept rollovers from an old employer's plan or a traditional IRA. Plans don't have to do that. Additionally, under rules to go into effect on 1/1/02, you no longer have to worry about adding money to your rollover IRA. ANY previously untaxed money in a traditional IRA, regardless of source (i.e., untaxed earnings, untaxed contributions, rollover contributions from 401k/403b/457 plans), may be transferred to an employer's qualified plan provided the plan will accept transfers.

4. I am going through all this trouble to basically convert my 401k to a Roth IRA (so that I never have to pay taxes again). IS there a better way to do this or do you see any faults in this plan?

Actually, it's the ONLY way you may get 401k money to a Roth IRA. Given that eventually any and all money you take from the Roth IRA will come to you free of income tax, at your age the Roth conversion you are proposing seems to be a right smart move IMHO.

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