IRA Rollover

Archive for the ‘401k Rollover’ Category

Question: Rollover 401K into a Roth IRA?????????

I have a 401K with a company I worked for 13 yrs and it “downsized” and closed its factory production where I was. I got a call from the financial company that handle the 401K and they want me to get my money out of that 401k since I dont work there anymore. I think that by law I do not have to move it but I heard that I could roll it to a Roth IRA and that I can take money out of that Roth to invest in the stock market etc etc?? Is this correct????? I have to call back these guys and find out what they suggest but dont want to get screwed just cause my former boss doesnt want to pay to have me in his companys 401k. Any correct info is appreciated…Thanks!

Answer: You can do what you say – you might be better off rolling it into a traditional IRA. Sounds like you will certainly get better service from a financial firm holding (broker, mutual fund company) than you will get from that 401k custodian.

If you roll into the Roth (which is only just this year possible, you used to have to go 401k -> IRA -> Roth) you WILL pay income taxes plus maybe also a 10% penalty tax on all the $ that rolls over. Ouch.

So 99% of the people roll into a normal IRA. You can buy stocks, mutual funds, CDs, etc. inside there. You do not need to tkae it out to do that. You will only be taxed when you take money out of the IRA.

Good luck – and get some good advice. I know of a lot of peopel who took their 401k $, started investing DIY in the stock market – and now their 401k is a 201k.

The technical term in the financial industry for this is “blowing yourself up.”

All the people who promise you sure-fire systems to trade and make $ – they are all fakes.

Rolling over 401K into IRA