| Transfer 401k to Roth IRA |
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jaybird28
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| Transfer 401k to Roth IRA |
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I have a Fidelity 401k from a previous employer. It looks like my best option is to transfer to a Roth IRA. I read that you have to leave the funds untouched in a Roth for 5yrs. I am 56 yrs old. Does that mean I can't withdraw at 59 1/2 without penalty
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Sat Jan 05, 2013 11:02 pm |
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oldguy
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If you transfer to a Roth IRA you must pay the full tax bill on the entire amount. So be sure that's what you want to do.
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Sun Jan 06, 2013 12:15 am |
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jaybird28
New Member
Cash: $ 1.50
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Joined: 05 Jan 2013
Location: Seattle
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I believe my best move is move my old Fidelity 401k to a Fidelity Rollover IRA.. There should be no tax hit---correct????
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Sun Jan 06, 2013 12:28 am |
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oldguy
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Correct. (That's what I did when I retired).
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Sun Jan 06, 2013 1:58 am |
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jaybird28
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Cash: $ 1.50
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Joined: 05 Jan 2013
Location: Seattle
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Thanks for the advise. Being that is a rollover IRA, what is the Max I can contribute from cash? Is it 2k or 5k and should I wait to years end or add to my investments asap
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Sun Jan 06, 2013 3:17 am |
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smk
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you want to convert to a roth ira when you feel your tax rate will not go any lower. the sooner this happens the better, so if you have a low tax rate now the conversion is a good idea. if you expect your tax rate to fall later on, convert at that point works out better. that is generally how it works. i am sure you can roll the old 401k to a fidelity ira if you wish.
Steve Kanney, CFA
http://www.integratedfinancialny.com/index.html
Any comments made are designed to help you make your own decisions and do not consititute investment advice.
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Sun Jan 06, 2013 3:37 am |
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Publius
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Jaybird,
The maximum you can contribute to an IRA in 2012 is 5000 and it is 5500 in 2013. This does not apply to rollover amounts, and you have until April, 2013 to contribute for 2012.
For example, if you rolled over $35,000 into your new IRA from your 401k, this isn't subject to yearly limits, then you could contribute $5,000 by April and then begin contributing toward your 2013 limit in May.
As far as when to put the money in for a given year, there are two schools of thought on this. The traditional thought is called dollar cost averaging (DCA) and is when you put the same amount in on a regular interval so that you buy at relative highs and lows throughout the year averaging the risk of short term volatility. The second thought would be to put money into the market in a lump sum because the general trend of the market over the long term (think decades) is upward. Neither of these methods try to take advantage of timing the market, because that has been shown to be a losing proposition generally. Recent studies by vanguard and a few others have shown that the lump sum would have performed better when analyzing the performance of the market from a historical perspective.
So, if you have the 5500 at the beginning of the year, it might be better to put it all in and let it ride, but if you are making deposits from your paycheck over the year, then use the DCA approach. And, again, don't try to time the market, just weather the ups and downs and look up in 20 years at the nice nest egg you have built.
Hope that helps. Good luck.
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Sun Jan 06, 2013 1:17 pm |
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jaybird28
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Cash: $ 1.50
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Joined: 05 Jan 2013
Location: Seattle
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That's great advise. Thanks a ton
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Sun Jan 06, 2013 4:29 pm |
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smk
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i am not an accountant, but personally i wait until the end of the year to add to an ira. that way i know for certain the amount i am qualified to add. you never know what can happen during a year that can impact this decision.
Steve Kanney, CFA
http://www.integratedfinancialny.com/index.html
Any comments made are designed to help you make your own decisions and do not consititute investment advice.
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Sun Jan 06, 2013 6:13 pm |
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Anton Martin
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| Re: Transfer 401k to Roth IRA |
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quote:
Originally posted by jaybird28
I have a Fidelity 401k from a previous employer. It looks like my best option is to transfer to a Roth IRA. I read that you have to leave the funds untouched in a Roth for 5yrs. I am 56 yrs old. Does that mean I can't withdraw at 59 1/2 without penalty
I would like to say that you should take advice from your financial advisor. Taking advice from financial advisor will make things more clear to you nad you can take better decision on it.
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Wed Feb 27, 2013 12:21 pm |
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