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I plan on rolling my 401(k) over into a traditional IRA.


The company I work for is being sold, so I am taking the opportunity to invest in the fool four through a discount broker.

Careful. I assume that you will continue to work for the new company. As a result, it makes a big difference whether your old 401(k) plan is being terminated or merged into a new one. In the former case, you should be able to take a distribution; in the later case you will not. Check with your current plan administrator for the right answer.

I have 1 request and 1 question regarding this maneuver:

1. I recall Pixy posting a how-to list regarding the rollover in order to insure you do not get hit with any penalties (ie, the conversion is viewed as a disbursement rather than a rollover). I would appreciate if someone could post a link to that discussion.

There are lots of posts on this subject; the essence of which, is that you want to go to the discount broker of your choice and request a Rollover IRA kit. Fill it out out including the transfer of funds form. This latter form causes your current 401(k) assets to move directly from the 401(k) plan to the brokerage without your hands touching the money. Technicially, it is called a "trustee-to-trustee" transfer. In this manner, no federal taxes are withheld.


2. How long do I need to keep this $ in an IRA before I can switch it to a Roth? I now know that I cannot move it directly to a Roth, but would like to switch the IRA rollover into a Roth as soon as it is acceptable to do so.

Next day. More practically, next week just to let the brokerage's recordkeeping keep pace.

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