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Author: 007wiseFool007 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75833  
Subject: old 401k -> ira or 403b? Date: 8/24/2003 2:45 PM
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Hi,

I have a 401k from a former employer. I want to move that money into a new account. The choices that I think I have are:

1. To rollover it into an IRA:

2. To rollover it into a Roth IRA:

3. To transfer it into a 403b account

One question concerning all the 3 options is: Are the rollover amounts counted in the current years' contribution limit of the account they are rolled into (eg, if I rollover $2000 from old 401k to roth ira, can I contribute an additional $3000 this year, or can I do only $1000)?

My 401k is pre-tax, so between the IRA's the natural choice would be a traditional ira. But I am leaning towards a roth ira because I think I can use the money better when if I purchase my first house ($10k max withdraw). So, if I do a transfer into a roth ira, then will I have to pay taxes now (401k was pre-tax)?

All this stuff is so confusing. These are a lot of questions, the answers will help in clearing a lot of concepts. I would appreciate any help!

007wiseFool007
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Author: Crosenfield Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37014 of 75833
Subject: Re: old 401k -> ira or 403b? Date: 8/24/2003 3:09 PM
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While ultimately you'd like your money in a Roth IRA, assuming your current income level makes you eligible for that vehicle, you are not allowed to put your 401K money there directly.
The correct procedure is to roll the money from the 401k to a traditional IRA. Once it is there, you can then convert to a Roth IRA, paying tax on the converted amount.
The IRA gives you far more options than a 403b account; only laziness or completetrust in your new employer would be excuses for the last option.

Yes, transfer to an IRA, and yes, when you transfer to the Roth you will have to pay taxes for that year.

Best wishes, Chris

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Author: W401K Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37015 of 75833
Subject: Re: old 401k -> ira or 403b? Date: 8/24/2003 6:41 PM
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Rollover contributions from a qualified plan to another plan or an IRA do not count towards your annual contribution limit.
Should you roll to a 403b, this will not reduce the amount you can contribute on a pre-tax salary deferral basis. Same is true for an IRA.

Bill

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Author: 007wiseFool007 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37019 of 75833
Subject: Re: old 401k -> ira or 403b? Date: 8/25/2003 12:40 AM
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Thank you for the clarifications. I think I am ready for the next step.

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