401(k)->roth ira


K

Kurt Ullman

Can I convert my old 401(k) directly to a Roth IRA without any tax
problems. I get easily confused if I need to pay taxes for the
conversion like you do regular to Roth Conversions.
 
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M

Mark Bole

Can I convert my old 401(k) directly to a Roth IRA without any tax
problems. I get easily confused if I need to pay taxes for the
conversion like you do regular to Roth Conversions.

Anytime you convert pre-tax retirement dollars to post-tax retirement
dollars, you have to pay the tax, so the answer to your question is
"no". You "need to pay taxes for the conversion like you do regular to
Roth Conversions."
 
J

JoeTaxpayer

Anytime you convert pre-tax retirement dollars to post-tax retirement
dollars, you have to pay the tax, so the answer to your question is
"no". You "need to pay taxes for the conversion like you do regular to
Roth Conversions."
All true, but I'd add - A conversion to an IRA, then to Roth leaves the
door open for recharacterization. If when doing your taxes next year you
see your conversion put you just into the next bracket, you have a
chance to back off the exact amount, and then convert next year.
 
A

Alan

All true, but I'd add - A conversion to an IRA, then to Roth leaves the
door open for recharacterization. If when doing your taxes next year you
see your conversion put you just into the next bracket, you have a
chance to back off the exact amount, and then convert next year.
This is an excellent point as in-plan Roth conversions can not be
undone. Another thing to watch out for is NUA (net unrealized
appreciation). If your employer plan holds highly appreciated employer
stock, you would the lose the capital gain benefit of NUA if you
transfer that stock to any type of IRA. And... lastly, in-plan Roth
conversions are still very new (ATRA 2012) and most employer plans have
not been modified to include a Roth feature and allow for conversions.
 
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R

remove ps

Kurt said:
Can I convert my old 401(k) directly to a Roth IRA without any tax
problems. I get easily confused if I need to pay taxes for the
conversion like you do regular to Roth Conversions.
You have to convert in pieces. In 2012 the standard deduction and
exemption is 5950+3800=9750. If you have no other income, then you can
convert $9750 tax-free. If your only other income is social security,
then you still may be able to convert $9750. I did a calculation that
showed if you have 30k of social security in addition to the $9750 of
conversion income, then none of it is taxable, but if you have 36k then
some of your social security is taxable, and so you would have to
convert less than $9750.

Now if you are over 65, married, have itemized deductions then you can
convert even more.

All the same, it's good to convert to traditional IRA first, then
convert in pieces so that you can recharacterize/undo part of the
conversion. The other post mentioned this.
 

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