Investing 104 - 401K Rollover - Dividend Stocks & Portfolios wanted

[Chad-1stGen]

Two things to be aware of when rolling over from a 401K into an IRA.

1. Assuming it is a traditional 401K (not a Roth) then it complicates doing any backdoor roth IRA contributions in the future.

2. 401K has better protection against creditors.

Just thought I'd throw that out there for ya.

[toy71camaro]

Originally Posted by Chad-1stGen

Two things to be aware of when rolling over from a 401K into an IRA.

1. Assuming it is a traditional 401K (not a Roth) then it complicates doing any backdoor roth IRA contributions in the future.

2. 401K has better protection against creditors.

Just thought I'd throw that out there for ya.

Im not 401k expert, but wouldnt you roll a 401k over into a Traditional IRA? both are "pre-tax" dollars. Seems like it would be complicated to roll a Pre-Tax 401k into an After-Tax ROTH IRA.

I could be wrong. LOL.

As for what to invest in, I'd suggest learning the principles behind the investing 102 thread, and doing your own research. It's important to know WHY you bought a stock, vs someones recommendation. If that stock so and so recommend is now down 40%, what you gonna do? sell it? buy more? Gotta understand "why" to make that decision.

My 2c anyway.

[Chad-1stGen]

Originally Posted by toy71camaro

Im not 401k expert, but wouldnt you roll a 401k over into a Traditional IRA? both are "pre-tax" dollars. Seems like it would be complicated to roll a Pre-Tax 401k into an After-Tax ROTH IRA.

I could be wrong. LOL.

I was referring to rolling from Trad 401K to Trad IRA and keeping it "pre-tax" money. This is only important if you exceed ROTH IRA income limits and want to use the "back door" contribution option available.

[toy71camaro]

Originally Posted by Chad-1stGen

I was referring to rolling from Trad 401K to Trad IRA and keeping it "pre-tax" money. This is only important if you exceed ROTH IRA income limits and want to use the "back door" contribution option available.

Oops Sorry Chad.. I accidentally quoted you Vs the OP. I meant that towards the OP who mentioned rolling over the 401k to a Roth. Sorry.

[XLexusTech]

If you are within the income limits consider a Roth conversion..

[NOVA]

Originally Posted by XLexusTech

If you are within the income limits consider a Roth conversion..

Schwab suggests to do a regular IRA or I will start paying taxes (now) if I do a roth IRA rollover, at least thats the way I understood it, they say why pay tax now? .... maybe I am misunderstanding

[ErikLS2]

If you convert it to a Roth you will have to put the amount you convert on your tax return as income for the year you do the conversion (since it was never taxed) and then be able to pay the tax on it either by reducing your refund or increasing what you owe. If you use money from the account being converted to pay this tax that's considered a distribution from that account and therefore subject to not only regular income tax but the early withdrawal penalty. Once it's converted though it grows tax free from that point on.

Basically would you rather pay tax on the balance in the account now at your current rates (if you're able to do so) or pay tax on the withdrawals as you take them out (presumably a much larger sum by then) at whatever rate you're paying at that time, usually a lower one for most people. Who knows what tax rates will be then though.

Oh, and I'm no accountant or anything. I've just done one of these conversions and I believe this is all true. Some things might have changed though but Schwab will know.