Apr 27

in most situations I have found that if you want to rollover funds from say a 401K to a Roth IRA, you must first rollover into a traditional or rollover IRA then convert that into a Roth… Of course you may incur fees and other costs to do so.

My question is, could you get around those fees by (using TDAmeritrade’s $500 minimum as an example) Opening a Roth with $500 and then rolling over additional funds from an existing 401K into the Roth? Or would you still have to rollover into a traditional IRA?


one comment so far...

  • Tim Said on April 27th, 2010 at 6:06 pm:

    The rule prohibiting 401(k) plans from allowing rollovers directly into a Roth IRA accounts were repealed by the Pension Protection Act last year. It now is possible but the plan must be amending to allow it and you must be aware that you must pay taxes on that amount as ordinary income, though you can typically spread that out over two tax years. If your taxable income is going to be unusually low this year, or this year and next year (perhaps you’re going back to school full time), this could be a smart move.

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