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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: of 19378  
Subject: Re: Rollover 401K to what? Date: 7/3/2001 8:16 PM
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"Is a Roth IRA available for this type of rollover?"

To put what you've already been told just a little differently,
yes, but it is a two-step process.
You roll your 401k to a traditional rollover IRA. There is no
tax due as long as you make it a trustee-to-trustee transfer and
do not yourself take possession of the money at any point. You
have the 401k trustee send the check to your new IRA trustee. Or
they can send the check, made out to the new trustee, to you, so
you see the amount of the check and that they did indeed issue it.
At this point you have the right to make a further conversion into a new employer's 401k if you so desire and the new employer accepts.

The next step involves taxes. If you then want to convert the
new traditional IRA to a Roth, and your trustee accepts the Roth,
you can direct the trustee to make that conversion. Tax will be
due on the non-taxed amount of the conversion, based on the value
of the conversion on the date of the conversion. Also at this point
you lose the right to subsequently convert to a new employer's 401k.

Before making such conversion, be sure your income level for the
year will fall into the range making you eligible for a Roth
conversion. If you make a mistake, you can "recharacterize" your
Roth back to a traditional IRA, but the trustee will charge you a
fee for doing it, plus there will be paperwork and some trouble.
Good luck! Chris
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