Hi, that is a good question which many people get confused about. NO, you cannot roll your 401 (k) directly to a Roth IRA. You first have to roll it into a traditional IRA.
Then you may convert some or all of the balance into a Roth IRA. Remember you will have to pay taxes on the converted amount.
There are strategies which can help pay for those taxes if you choose and if the strategy makes sense.
Feel free to reach out to me if you have further questions.
Agent Owner, Gilmore Insurance Services, Marysville, Washington State
Can you rollover your 401k to a roth ira? Not really no, there is no provision that allows you to roll the values in your 401k into a Roth without tax penalties. If you did something like this you would need to cash out your 401k which would be taxed at an income tax level combined with your current income, along with a 10% penalty. So you would be losing roughly 40% or more of you 401k values. Not something easily made up no matter how good an investment picker you might be.
Financial Advisor, Watermark Asset Management, San Ramon CA
There is one circumstance that I am aware of that will allow you to roll a 401(k) balance to a Roth IRA without the associated taxes and penalties. If your 401(k) plan has a Roth option, which is becoming more common, then you can roll the Roth portion of the 401(k) to a Roth IRA.
I actually just did this for a client who had a 401(k) balance that had two balances, one Roth and one traditional. We created two Rollover IRA accounts, one Roth and one traditional and completed the rollover.
Can I Rollover My 401(k) To A Roth IRA?
Great rollover question--one that we frequently get asked! In most cases yes. But understand that you will have to pay taxes on the value of the rollover, as the money in a traditional 401k is pre-tax in nature. So, you may wish to wait until retirement (lower income generally) to do this to minimize your taxes. Or you may want to do partial rollovers and incur the taxes in different tax years. I hope that helps! Always consult your tax advisor for your individual situation.
Ron
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Then you may convert some or all of the balance into a Roth IRA. Remember you will have to pay taxes on the converted amount.
There are strategies which can help pay for those taxes if you choose and if the strategy makes sense.
Feel free to reach out to me if you have further questions.
Merry Christmas.
Matt
I actually just did this for a client who had a 401(k) balance that had two balances, one Roth and one traditional. We created two Rollover IRA accounts, one Roth and one traditional and completed the rollover.
Great rollover question--one that we frequently get asked! In most cases yes. But understand that you will have to pay taxes on the value of the rollover, as the money in a traditional 401k is pre-tax in nature. So, you may wish to wait until retirement (lower income generally) to do this to minimize your taxes. Or you may want to do partial rollovers and incur the taxes in different tax years. I hope that helps! Always consult your tax advisor for your individual situation.
Ron