What Kind of taxes Can I expect When rolling over my 401ksavings over to a Roth IRA?

Question

Is there a differenc if its a traditional or Roth?

Answer 1

If you roll your account over into a Roth IRA, you will be taxed an automatic 20% in taxes right off the top. Now if you have a high income, expect to be taxed more down the road since your 401k is a tax deferred account.

If yo roll your account over into traditional IRA, you will not be taxed as this is a taxed deferred account as well.

I would recommend rolling your account over into a traditional account and than transfer the funds from your traditional IRA to a Roth IRA slowly over time. That way you could reduce your taxes.

Answer 2

yeah, roll it to a traditional IRA account, which is just like a 401k but in your name (not your former employers') with a bunch more investment options - this doesn't cost anything provided you "roll" it properly. if you were to then choose to turn your IRA into a Roth IRA, the value would be taxed at your ordinary income tax rate in the year that you make the conversion. Keep this in mind - more people are in a lower tax bracket when they are retired (and earning less money), so does it make sense to pay taxes now - and cut into your nest egg - while you are working or should you worry about paying taxes on the money only when you need it? There is no right or wrong answer to this, but something to consider.

A roth is AFTER TAX money (which is why you would have to pay taxes on your IRA / 401k if you were to convert it into a Roth) and you don't pay taxes on any gains you incur, ever. An IRA is all pre-tax money, so whenever you take your money out it is taxed...either way the IRS takes their piece whether it is before it goes into a Roth or when it is taken out of a traditional IRA.

Answer 3

If you roll it over to a regular IRA you will not be taxed currently.

If you roll it over into a Roth you will be taxed and they will probably withhold 20% in taxes when you withdraw from the 401K. That does not mean the tax you eventual incur will be 20%. That depends on your tax bracket.

Answer 4

I concur with gtn - I just rolled over my 401k too and my financial advisor said to roll it to a Traditional 401k first to avoid a huge tax hit, and then move it later to a Roth IRA.

Answer 5

Don't think they tax ya by rolling it over especially into an IRA. Now if you pull money from your IRA then they tax the shite out of ya.