Due to reorganization I have been forced into early retirement can I take my 401K and move it into a Roth IRA?
Sunday, January 31st, 2010 at
5:18 am
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You can, but why>???? You’ll pay a 10% penalty PLUS taxes…
Roll it into a traditional IRA….
not free, no
you would have to pay income taxes on the value of the 401(k) because the Roth IRA is tax free for life.
There are no penalties for doing this as long as you request a "direct rollover" from the 401k to the Roth IRA. In the past, you had to first do a direct rollover into a traditional IRA, then convert the traditional IRA into a Roth IRA. Now, you are allowed to go directly from the 401k into the Roth IRA if you want to.
You will have to pay taxes (but no penalties) on the distribution from the 401k IF it is a traditional 401k. But, going forward the money in your Roth IRA will grow tax-free and all your distributions from the Roth IRA in the future will be tax free, as long as you follow the rules for qualified distributions.
However, if you happened to have a Roth 401k, which have been around for about four years now, you can request a direct rollover from the Roth 401k directly to a Roth IRA without paying taxes on the distribution. That is because you would have been contributing to the Roth 401k with post-tax dollars.