No. of Recommendations: 0
What is the process for rolling a 401(k) over to a Roth IRA and what occurs as far as taxes owed?

The particulars of the process depend on what the 401(k) administrator and the IRA trustee require. But in general, when you do the paperwork you need to indicate that you want to do a combination rollover and conversion from a 401(k) to a Roth IRA.

Nothing will be withheld for taxes from the distribution if you do not request it to be. This is good, because you don't want to withhold anything from the distribution. If you do have some of the distribution withheld, you will owe taxes plus a 10% penalty on the withholding, assuming you are under 59 1/2.

If you do the rollover/conversion in 2009, in early 2010, you will get a 1099 that shows the amount converted as a distribution from your 401(k). When you fill out your tax forms, you will need to indicate that the amount distributed was converted into the Roth IRA and you will owe taxes, at your marginal rate, on the amount converted. If the conversion amount drives you into a higher marginal bracket, you will end up paying taxes at the higher marginal rate.

AJ
Print the post  

Announcements

The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement