I am 25 years old and have a ROTH IRA and a 401k at work. In the next year I plan on moving on from the company I work with and was wondering what to do with my 401k. I assume if I roll it into the ROTH I will have to pay taxes which I don’t want to do. If I roll it into what they call a “Rollover IRA” can I make contributions to that in the future? What is the best company to go to to start an IRA? Thanks for any advice.
Walter
{ 3 comments… read them below or add one }
Tracy
You can think of a traditional IRA as the same as your 401(k) Plan at work, only there’s no employer contribution and you have complete freedom over what you can purchase/sell/hold in your account.
What you’ll need to do is open a traditional IRA with a good investment firm (I like Edward Jones and Charles Schwab). When you do decide to leave your job, your employer is required to give you information on a distribution. In that packet, it will explain how to rollover your balance into an IRA. If it doesn’t, then ask your HR person or whoever is in charge of the plan at your employer. They have to explain everything to you so that you understand.
When the transfer has been completed, you will be short any amount the your employer had contributed for you that was not yet vested, but you won’t have to pay taxes on it. From that point on, you can contribute annually to your IRA similarly to the way you did with your employer’s 401(k) Plan, only the limit is lower.
I hope that helps. :0)
Judith
You want to roll it into a conventional rollover IRA. Yes, you can make contributions to the conventional IRA but at your age you’re better off contributing to the Roth.
The “best company” for a custodian depends on how you want to invest the money - decide that first.
Ted
If you rollover 401k into an IRA you don’t have to pay taxes on it.
You can always make contributions to your IRA regardless of what type it is. You just cannot make more than $4500 in contributions in one year.
There are tons of companies that do IRAs. Your own bank may have them. Call them and ask. If you are concerned about rolling over your 401k you should call them and speak to someone, they can tell you the difference between a Traditional and a Roth IRA. Also, you can have more than one IRA, as long as between all of them you do not contribute more than $4500 in one year combined.
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