Rolling Over a Roth 401k
What is a Roth 401k?
A traditional 401k is set up by employers with pre- or post-tax dollars, but a Roth 401k is an investment account that is always set up with after tax dollars. So long as you keep the fund active for at least five years, all earnings you receive from the account are tax free. Because the earnings are all tax free, the Roth 401k is an excellent tool for easing your tax burdens later in life.
Roth 401k Rollover Rules
The Roth 401k is not a tool for everyone. There may be income and deposit limitations on the Roth 401k that will prevent you from utilizing the tax advantages of this investment vehicle. These laws are constantly changing, so it is best to contact a Roth 401k specialist if you have any questions.
The Basic Roth 401k Rollover Strategy
Typically, the best strategy for rolling over a Roth 401k is to place it into another tax-exempt account like the Roth IRA. This will help preserve the tax benefits attached to your Roth 401k. If your account has matured, many other variables come into play than we can discuss here, so I will remind you to consult a specialist in rollovers. You can get a free consultation by simply using the form on this page or from our Free Consultations page.
The Timing of Roth 401k Rollovers
Your Roth 401k has a five year clock attached to it, based on your first deposit. In order to preserve the tax exempt status of earnings, care must be taken in any rollovers before this time period is over. Please consult a professional financial counselor to protect your savings and your financial future from mistakes in rolling over your Roth 401k.
Setting Up Your New Rollover Account
Before you withdraw the funds in your Roth 401k, you will want to have the new account in place to receive the funds. Although most accounts have a 60 day window in which to make your arrangements, having any delay could have disastrous consequences. It goes without saying that making all the arrangements for a smooth transition is essential for a safe Roth 401k rollover.
Getting Free Rollover Advice
It can be expensive to get a financial strategist to help you plan the rollover of your Roth 401k. If possible, seek out a professional rollover specialist that will offer free consultations. If you have no relationship with this person, then the advice you get is likely to be sound. Of course, we offer these free financial needs consultations and have many specialists in Roth 401k rollovers ready to advise and assist you for free. Start by using the form above and we'll be in touch right away.