401k to Traditional IRA to Roth IRA costs and risk...?

Question

I have a 401k from my former employment. My CPA says to turn into a traditional IRA and then over to a Roth IRA for tax benefits eventually. He suggest investing in a very low risk A bonds and 25% low risk stock.

His reasoning is we are only taxed now on the lower end of balance, but later as it grows will be beneficial to us then.

I am 52. I plan on using the funds after 59.5 yrs.

1. Is there always a fee connected with rolling over into an IRA -- bank, cpa, etc.

2. Does this sound like a wise?

I am very conservative in my finances.

I have 150,000.00 to roll over. The fee to change to IRA is 3.5% = $5,000.00 the cost to change to Roth for taxes may will be substantial. We are both retired now. Our income will be the same so our tax bracket should not change much.

I meant to say those fees are to change from 40lK to Traditional IRA....

Answer 1

If you think your tax rate will be lower in 7 years, you probably don't want to convert; if you think your tax rate will be higher in 7 years and you can pay for the conversion, you might want to consider converting. I go into greater detail in my answer in the link below.

Answer 2

There should be no cost to rolling the 401k to the IRA. The cost of rolling the IRA to a Roth is the taxes you will pay on the value of the IRA. I would suggest doing it all through a firm such as Vanguard where there are no fees and a variety of mutual funds so you get diversification in both the bond portion and the equity (stock) portion of your investments. With 7 years before retirement I think the 75% in fixed income (bonds) is too great, but you can discuss that with a financial adviser. Generally, accountants aren't too good at that.

Answer 3

There is usually a small fee when you roll in to an IRA. The 401k will probably charge you a "Account Closing Fee" and the IRA may charge you a fee to open the account.

Whether you convert to a Roth is up to you. Personally, at your age, there is probably little to no advantage to going to a Roth. If you were 20-25 years younger, sure, but not now.

I rolled a 401k in an IRA last year and I am leaving it in a Traditional IRA and I am 10 years younger than you. To each his or her own.........

Answer 4

There may be a fee for converting IF the investments you are transferring to the new company (receiver) of your account and the receiver company does not have the same funds as you. Usually, there is a little fee involved for their selling your investments. Is your CPA a financial planner also, if not, let him advise you for personal or business taxes, not investments.