401K Rollover to Roth IRA V


olatile 401K performance leads any to eaine te benefit of a


401k rollover to Roth IRA. With large ontribution ap and te benefit of tax-free withdrawal of funds, it is a vi- able and potentially lucrative option.


Getting it Done


Opening an account is as simple as choosing an investment company to handle the paperwork and invest the money for you. Unless your employer is participating in the Roth 401K, you will have to pay taxes when moving this money into a Roth account. Any married couple with a total income of $167,000 or less is eligible, so assuming you have made a decision that the Roth is right for you, start by getting an ac- count opened up. For a Roth 401k rollover to Roth IRA, a simple phone call is all it takes to move the funds, and no additional taxes need to be paid. When moving funds from your


401k into the new account, be sure the e i ade out to te fir andling it, or deposited directly. A check made out to the individual is subject to an immediate tax penalty of 10%, on top of the taxes, which will be paid on the distribution. Fortunately, the new laws for 2010 allow taxes on the rollover to be spread over three years if desired. For 2010, they are deferred, with the remainder broken into two consecutive 50% pay- ments for 2011 and 2012.


Distributions The IRS has made it as easy as pos-


sible to rollover from 401k to Roth IRA, and there are many investment compa- nies willing to take on your business. The only limitations are those pertain- ing to adjusted gross income and the


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inevitable taxes, which will be paid on the funds moved. Even if you are already receiving distributions, you have a sixty-day period in which to place this money in the Roth account tax-free, as long as it is paid directly to the IRA.


Advantages and Disadvantages People usually consider a 401k rollover to a Roth IRA when they are changing jobs, when their 401k has been per- forming poorly, or if they prefer not to be penalized upon withdrawing the money. With the Roth IRA, contribu- tions made directly to the fund can be withdrawn tax-free anytime, and with- drawal of rollover contributions are ta free after a iniu period of five years. Earnings can be withdrawn free and clear once the account holder is 59 ½ or older.


ile tere are any benefit to moving money to a Roth fund, people at the upper end of the income tax bracket are going to be taxed at their current rate on contributions to the their Roth account, which can be sig- nifiant f oure if te peron die te ta benefit will never be realied by the individual, but they will be re- alied by te deignated benefiiarie Aside from the advantage of tax-


free income, there are no limits to how much a person can rollover from their 401K, and once in a Roth account, they will have access to this income much sooner. Just keep in mind, withdrawn funds cannot grow, so be sure to treat your retirement account accordingly.


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At Bank of the West, we value the individual.


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© 2010 Bank of the West. Bank of the West and its subsidiaries are equal opportunity/affirmative action employers. M/F/D/V Celebrating 19 Years of Diversity HISPANIC NETWORK MAGAZINE 83


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