converting 401K to Roth

Society Business and Career
1

With the massive losses pretty much everyone has seen, I am trying to figure out the impact of converting pretax 401Ks into Roth IRAs.

take the losses, and then convert them to roth so there is no tax on it when you withdraw.

any good rules of thumb on when it would make sense to do so.

2

Re: converting 401K to Roth

hmm dont u think that its too late to "take the losses" ??? if u had done it when dow was near 11000 or even 10000 it was ok, but now u would lock ur loss, so i think its better to stick with ur investment now.

PS. i dont even know wat is 401K or IRA is so i might be wrong

3

Re: converting 401K to Roth

I agree with Eco, no point in making the move now unless you moved your 401(k) to “Cash” or something stable (what stable? :cb:, may be gold) when Dow went south of 10,000 which didn’t depreciate as much (really?).

Pakistan vs Australia - 2nd ODI - 2012
4

yeah lock your loss, take the distribution, report the loss on taxes, put the money into Roth

ecoshan- 401K is a tax deferred retirement account
roth is post tax.

There is definite merit in doing so, but it depends on your current income, tax situation, amount of losses, and not just the impact now, but also the proceeds at your retirement on a 401K after paying taxes vs on a roth where there will be no taxes.

so now that I have schooled you boys.

anyone who know this stuff ready to contribute ;)

5

Re: converting 401K to Roth

there are limits to the losses oen can take, and how capital losses and cap gains are matched first,

I cant open a roth so was trying to see if it makes sense to take some distributions and roll em into a roth, but dont think that is possible for me to do either.

Yet another game thread.. but usefull..
6

Re: converting 401K to Roth

I would hold off -
One why pay taxes now? you'll be in a lower bracket at retirment/maturity.
the Roth will limit you contribution and I think you're too young to take advantage of anything catch up wise.

Hang tight - your 401k will come back up. Atleast thats what I'm doing.
I dunno if you already have a rollover IRA (most of us do if we move around) but I would stick to that and combine with 401k --- its money already saved, why would want to roth it (the only benefit i see is a penalty free distribution).

7

Re: converting 401K to Roth

PS roth ira -- you still have to pay taxes; just taxed as income rather then 401 k where its rgular taxes plus the penalty (or if you wait till retirement only income taxes)

8

Re: converting 401K to Roth

this country will have to raise taxes in my view. especially as gen x'ers are stretched to pay for the greedy generation oops i mean baby boomers. dont be so happy Gen y/millenials, you would have to pay for boomers as well.

so the variables are tax bracket now versus tax bracket when i retire. it is assumed that I will be in a lower tax bracket when i retire, we dont know that.

secondly tax rate now versus tax rate when i retire.

so assuming all stays the same or going with the standard assumptions.

tax bracket being a lower tax bracket at retirement

so here is a hypothetical, I make $200K today.
at retirement I would be making very little from something, lets say lowest tax group $30k

and lets say both the 401K and roth ira have the same returns, i have it in the exact same investments.

what is $100 in 401K equal to in roth IRA,

at what numbers does it make sense for me to move funds from 401K, take losses, pay taxes, move them into Roth and pay less taxes at returement distribution.

Muniya, this is your homework :)

9

Re: converting 401K to Roth

I am hanging tight, actually among few ppl who have done well in last few months after I got sick of the stuff and started selling and buying index funds with market moves...buying before it hits bottom but on its way there and selling on way up, although not at top.

I am putting it here for discussion.

10

Re: converting 401K to Roth

I dont even feel like looking up whats left in my 401K.