2010 Brings Easy 401k Rollovers to Roth IRAs
A change in the tax code and laws has made it easier for investors to rollover a 401k into a Roth IRA. Instead of the old two step process of opening two IRAs, investors should now be able to make the rollover in one fell swoop.
The Old 401k Rollover Process
Before this year, investors had to roll over their 401ks to Roth IRAs by first rolling funds into a traditional IRA then moving again to the Roth IRA. This painful, and often expensive, task takes far too much time and was in itself enough of a barrier to prevent the rollovers. Today, doing the rollover is a one-step process. Simply open a Roth IRA account and make the switch!
Roth IRA Rollovers and Taxes
Obviously there are some differences in the tax code for 401ks and Roth IRAs, namely that 401ks are pre-tax while Roth IRAs are post-tax. Nevermind this seemingly large complication, the tax code will allow investors to split their tax burdens over two years. Investors will be able to pay 50% of the taxes in 2010 and 50% in 2011, allowing for the opportunity to spread out your tax bill and plan ahead.
Roth 401k to Roth IRA rollover
Roth 401k investors looking to transfer to a Roth IRA have it as easy as possible. A Roth 401k to Roth IRA rollover requires nothing other than a change at the place holding the account. This process is as simple as possible as there are no tax differentials between accounts. Just pick up your phone, call your provider and tell them you need to transfer. Bingo-bango, you’re done!
It is possible for the Roth 401k investors to transfer to a Roth IRA. It requires a change in the place holding the account. As there is no tax has to be paid the process is simple. This post is very helpful for the beginners.