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Author: Bobbcat Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: Re: 401K rollover to Roth question Date: 10/17/1999 7:16 PM
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What kind of taxes must be paid on a company 401K that I want to rollover into a new ROTH IRA ????? thanx in advance......Steve

Steve,

The conversion from a Traditional IRA to a Roth IRA is taxed at your marginal tax rate. The amount of the conversion may throw you into a higher tax bracket. You should look at whether you need to pay estimated taxes to avoid underpayment penalties.

You cannot "technically" roll directly from a 401k to a Roth. Since it is a taxable event, your 401k provider is required to withhold 20%. Depending on your tax bracket, this may or may not cover your tax bill. Also, if you don't cover the 20% shortage within 60 days, that portion is considered a withdrawal.

If you don't meet any of the exceptions (if you're under 59 1/2 you probably don't) there is a 10% penalty on any withdrawal not rolled over into a traditional IRA or converted to the Roth.
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