Follow up question to Roth 401k conversion
I sent a question earlier about my Roth 401(k) conversion. I should have indicated that I’m currently 56 years old, unemployed, and hope to get back into the workforce soon. I did not have taxes taken out because I thought there would be a penalty for being under age 59 1/2. I ended up paying the tax online directly to the IRS. Do you think I did the right thing?
Additionally, I am wondering if you think it is better to leave this Roth money in the 401(k) or if I should transfer to an IRA. Since I’m not working, I believe this is now a penalty free option. The options in my 401(k) are pretty standard and nothing too costly. However, if I transfer to my IRA, I believe I could use some no fee funds which are not available in the 401(k).
Terry Says
Sorry, I answer so many questions I can’t remember details of yours!
So, I’m presuming you still work at the company and they gave you the option to convert a portion of your 40l(k) into a Roth 40l(k) version they offer? Or did you leave the company and leave the Roth 40l(k there with your former employer — having paid the required taxes on the conversion.?
And are you now considering a rollover of that Roth 40l(k) to a place like Vanguard or Fidelity where you will have a wider choice of low cost investments in a Roth IRA Rollover? If so, contact them to handle the transaction so you don’t fall victim to the “5-year rule” which says you must hold the Roth account for 5 years or face tax consequences.
I don’t know why your former employer would have any restrictions on a rollover now that you’ve left — but do check with them as well before starting this process.
