401k rollover after job loss: Roth or traditional IRA?

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  • #93872 Reply

      I was just let go from my job and am trying to figure out what to do with my 401k and HSA.

      I have about $12,000 in my 401k. Can I roll over a portion to max out my Roth IRA and put the rest in a traditional IRA? I understand that rolling into a Roth will incur taxes. I also do not have another 401k option to roll over to. Or should I put it all in a traditional IRA to not incur any taxes?

      I will, of course, make the best decision for me, but any help is appreciated.

      #93873 Reply

        if is a traditional 401k, roll it over to a traditional IRA. Good luck in your new job search.

        #93874 Reply

          It really depends. If you have after tax contribution in your 401k, you can rollover that part to a Roth IRA tax free. If you don’t, then you have two options –
          1. roll over to a traditional ira and avoid paying tax.
          2. Pay tax and roll over to a Roth IRA.

          #93875 Reply

            A company Capitalize will help you roll over for free. I used them to roll over two different 401k I had lost. They were awesome. They had to find one that had gone to a trust.

            You can do it on your own but if not well versed this company is great.

            Also, check out: 401k fees: Fidelity 500 vs. State Street Retirement 2050?

            #93876 Reply

              Rollovers are considered transfers, not contributions, so there isn’t any ‘maxing out’.

              If you think you’ll ever do the ‘backdoor Roth’, then transfer to a new 401k.

              If you’ll never do the backdoor Roth, then IRA transfer is fine.

              #93877 Reply

                If your 401k was only traditional. Open a vanguard account. Move your 401k to a traditional IRA and leave in your current investments or move to VTSAX.

                My husband and I have moved a few companies over the years. It’s good to have a Traditional IRA and Roth IRA as your main pots sitting with a company like Vanguard so while you are with a company you do the match and when you leave you just roll it over into your pain pots.

                #93878 Reply

                  If you might be unemployed for a few months, lowering your annual income this year, but have money saved, or land a job later this year and earn enough to pay taxes on a Roth conversion of the $12k, I’d consider that path.

                  Those funds and their growth would be tax free for life after that.

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