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I have a tiny sliver of non-deductible money in the 401k (like 0.5%). I understand that when doing a 401k-to-IRA rollover, you can roll the deductible money (plus match plus earnings...whatever never got taxed) into the IRA, and roll non-deductible contributions into a Roth.

After I retired my former employer notified me that they were going to move the 401k to a different provider. I decided to roll it over into an IRA with the current provider. I too had a minuscule amount that was already taxed. I do not recall being offered the ROTH option. I just took it as cash.


It's certainly an option to take that pre-tax money as cash. Here's the article that I read describing what I wrote:
Q: I made after-tax contributions to my 401(k). When I retire, can I roll that money into a Roth IRA tax-free?
A: Yes. After-tax funds can be segregated from other funds in the account and transferred directly to a Roth IRA.

https://www.kiplinger.com/article/retirement/T046-C000-S002-...
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Before I retired, our company's 401K had an S&P500 index fund that had a lower E/R than what you could get yourself in an IRA. These days that is not the case.

I don't see much advantage in keeping the 401K. Except if it has funds that you like that are better (read: cheaper) than what you could get at Fidelity, Vanguard, etc. in an IRA.

One thing: Many brokers will give you a bonus for opening a new account. Merrill gives $600 for a $200,000 transfer in.

I did partial transfers of my 401K to 4 different brokers, and got almost $2500 in bonuses.
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My employer's 401k had steep fees, so I contributed only as much as needed to get the match, which (just barely) offset the fees. When I left, the first thing I did was roll the 401k over to my Traditional IRA at Vanguard (trustee-to-trustee).

Since I was under 59.5, I couldn't do the rollover while still with that employer. Since you're older, you might be able to. If not, since you "have three to 12 months of work left," you could do it when you leave, no problem.

One interesting aside: when I did the rollover, I needed DH's permission. I guess a work-related retirement plan is a marital asset, whereas an IRA is "individual."
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One thing to keep in mind, which may or may not apply depending upon your circumstance, but potentially impacts conversions from traditional IRA to Roth IRA.
If you have any non-deductible contributions to a traditional IRA and are planning to convert those to a Roth IRA, rolling your 401k balance into an IRA will dramatically increase the IRA taxable balance upon conversion.

Also, if you have savings that can be used to pay the taxes due from the Roth IRA conversion, you may still want to contribute to the 401k even without the matching to lower your taxable income. Depending on the amounts involved, this could even offset the taxes due from the Roth IRA conversion.
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There can be different legal protections on the accounts, I don't know enough here and I've read differing opinions (and getting legal advice online isn't a good idea anyhow).

I generally roll it over due to variety of funds/investments but as others have pointed out it can have some negatives with it as well.

In one case I left some money in an account because it provides some things I can't get elsewhere and it allows me to transfer more money in at a later date if I like those "features" (government TSP for those curious).

I have no idea if this is 100% true but I think even if you roll it over to an IRA you can later roll it into an employer's plan. My limited (wrong?) understanding is the 401K may allow you to withdraw money as early as 55 under certain circumstances as opposed to 59 1/2.

Just my rough understanding. Hopefully not too wrong.
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One interesting aside: when I did the rollover, I needed DH's permission. I guess a work-related retirement plan is a marital asset, whereas an IRA is "individual."

Actually, IRAs are generally considered marital assets, if you've used any money made during the marriage to contribute to them. Moving your 401(k) that you contributed to during the marriage into an IRA would make that IRA a marital asset.

Under ERISA, employer plans have stronger Federal rules about spousal notification/permission than IRAs. Kind of like under ERISA, employer plans have stronger Federal rules against creditor's claims.

AJ
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-My company stopped its matching for the rest of the year, so I stopped contributing to the 401k and have been banking the normal contribution so as to pay the extra income tax caused by this year's Roth IRA conversion(s)

If you were planning on converting up to the top of a bracket, remember that making contributions to the 401(k) would allow you to convert more, since the contributed amount won't be considered taxable.

You may want to consider what the chances are that your company could reinstate the match retroactively.

AJ
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If you have any non-deductible contributions to a traditional IRA and are planning to convert those to a Roth IRA, rolling your 401k balance into an IRA will dramatically increase the IRA taxable balance upon conversion.

I have a tiny sliver of non-deductible money in the 401k (like 0.5%). I understand that when doing a 401k-to-IRA rollover, you can roll the deductible money (plus match plus earnings...whatever never got taxed) into the IRA, and roll non-deductible contributions into a Roth. Of course, whatever the non-deductible contributions earned while in the 401k will be taxed with the rest of the pre-tax stuff, but once it's in a Roth, all the gains from then on are tax free.

I looked into that a few years ago when I first heard about the possibility, but at that time (younger than 59.5) I couldn't make use of it because you have to roll over everything...you can't just roll the pre-tax contributions.
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If you were planning on converting up to the top of a bracket, remember that making contributions to the 401(k) would allow you to convert more, since the contributed amount won't be considered taxable.

You may want to consider what the chances are that your company could reinstate the match retroactively.



I think the likelihood is zero for the company to give any money retroactively. And as far as paying taxes on the conversion AND contributing, it's just not in the cards because we're on "furlough" (unpaid) two weeks of every month. I did include the loss of nine months of deductible contributions in my calculation of my income to try to both estimate the amount of tax and stay below the $150K limit for the $1200 stimulus checks.
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"Should I change my 401k to an IRA?"

*************************************************

The only reason to keep funds in a 401K are matching contributions.
You want to take advantage of any funds you can obtain.
If there are no funds coming to you - then the only thing that comes with the
401K are strings.
Folks can collect enough strings on their own without giving others strings to
grab and pull
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Merrill gives $600 for a $200,000 transfer in.

And you can negotiate higher amounts for higher transfers. We got $900 for $350K about a year ago.

IP
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I have a tiny sliver of non-deductible money in the 401k (like 0.5%). I understand that when doing a 401k-to-IRA rollover, you can roll the deductible money (plus match plus earnings...whatever never got taxed) into the IRA, and roll non-deductible contributions into a Roth.

After I retired my former employer notified me that they were going to move the 401k to a different provider. I decided to roll it over into an IRA with the current provider. I too had a minuscule amount that was already taxed. I do not recall being offered the ROTH option. I just took it as cash.

In any case, the whole thing went fine for me, and for the first time I was able to invest in individual stocks. I joined TMF Stock Advisor. Within six months I had moved entirely from funds to stocks.
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I have a tiny sliver of non-deductible money in the 401k (like 0.5%). I understand that when doing a 401k-to-IRA rollover, you can roll the deductible money (plus match plus earnings...whatever never got taxed) into the IRA, and roll non-deductible contributions into a Roth.

After I retired my former employer notified me that they were going to move the 401k to a different provider. I decided to roll it over into an IRA with the current provider. I too had a minuscule amount that was already taxed. I do not recall being offered the ROTH option. I just took it as cash.


It's certainly an option to take that pre-tax money as cash. Here's the article that I read describing what I wrote:
Q: I made after-tax contributions to my 401(k). When I retire, can I roll that money into a Roth IRA tax-free?
A: Yes. After-tax funds can be segregated from other funds in the account and transferred directly to a Roth IRA.

https://www.kiplinger.com/article/retirement/T046-C000-S002-...
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