You can withdraw your converted amount, not the gains, after 5 years even if under 59-1/2. That's another way around the 59-1/2 rule for 401s and IRAs.
Great video Drew! Wish I would have come across this many many years ago when looking at helping my wife with her old 401k. She will be 55 in 2025 and she has over $1 million in an old 401k. I have no clue what we should do with it. Roth or Traditional IRA conversion? Leave it in the old 401k and deal with it later? Seems like a Roth IRA conversion will be so very costly tax wise. Plus she is probably 10 to 15 years from retirement. Any help you can provide is greatly appreciated!
Drew why is it that seldom do FP ( such as you) suggest that 401k should be transferred to Roth 401k. Isn’t this the same thing or does the transfer/conversion has to be specifically Roth IRA? Please explain.
Not all 401(k) plans allow t-401(k) conversions to Roth 401(k).; tax is due on that amount converted and if tax is taken from the 401(k) then early withdrawal penalty applies. If employees has t-401(k) and wants Roth 401(k), better alternative is to simply contribute to Roth 401(k) instead of converting.
Great audio quality on this one. I heard about some mathematician computer programmer that figured out that Roth IRS are loved by the government as a way to get more taxes out of the people. Really? How many people are going to be in a equal or higher tax bracket in retirement realistically?
Hi Drew, I accidentally made a mistake and rolled 401k into roth IRA, and my tax rate is 24%. Is that super stupid or there is a good thing there? I am 38. I understand i will need to pay tax but is there penalty or something.. supper scared
@@darineedtippimanchai3865it’s good and bad. Yes you have taxes to pay but if you don’t touch the money where it is now, the compounding interest will be phenomenal by the time you reach 59 1/2 yrs old and it’s all tax free!
Depends on how you interpret the tax code. I would consult with your CPA. I prefer to interpret the 5 year rule no matter how old but others say 59.5 is an exception to the rule.
You can keep your 401k in retirement. You just cannot contribute more to it. You can still reallocate, withdraw or convert funds. Most people convert from a 401k to an IRA after retirement due to limited investment choices in company 401k's.
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You can withdraw your converted amount, not the gains, after 5 years even if under 59-1/2. That's another way around the 59-1/2 rule for 401s and IRAs.
Yes!
This 5 year rule only applies to the converted money right not to regular contributions ?
Great video Drew. I like the way you take the time and effort to go through details.
I appreciate that!
Great video Drew! Wish I would have come across this many many years ago when looking at helping my wife with her old 401k. She will be 55 in 2025 and she has over $1 million in an old 401k. I have no clue what we should do with it. Roth or Traditional IRA conversion? Leave it in the old 401k and deal with it later? Seems like a Roth IRA conversion will be so very costly tax wise. Plus she is probably 10 to 15 years from retirement. Any help you can provide is greatly appreciated!
Thanks for watching! Please reach out to me directly and we can discuss: info@pearlwealthgroup or pearlwealthgroup.com
Thanks, Drew. Would those 6 Roth IRA accounts typically be at the same financial institution or would they need to be at different places?
I would say the same place just to keep it organized
Great explanation. Thank you
Glad you liked it
Great video.
Thanks!
Drew why is it that seldom do FP ( such as you) suggest that 401k should be transferred to Roth 401k. Isn’t this the same thing or does the transfer/conversion has to be specifically Roth IRA? Please explain.
I am assuming that the client is retired. Other factors could keep the 401k in 401k form just as a Roth (ex. under 59.5)
Not all 401(k) plans allow t-401(k) conversions to Roth 401(k).; tax is due on that amount converted and if tax is taken from the 401(k) then early withdrawal penalty applies. If employees has t-401(k) and wants Roth 401(k), better alternative is to simply contribute to Roth 401(k) instead of converting.
Another great video.
Thank you for always watching and commenting Punisher!
@@yourfinancialekg You're welcome.
Great audio quality on this one.
I heard about some mathematician computer programmer that figured out that Roth IRS are loved by the government as a way to get more taxes out of the people. Really? How many people are going to be in a equal or higher tax bracket in retirement realistically?
Good comment!
Great example!!!!!
Drew, I think I understand this. But to confirm, the amount you convert is taxed at your marginal tax rate, correct?
Yes
Is it better to convert at a lower tax bracket?
That would be the goal but with taxes and where they might be going, now seems good!
Hi Drew, I accidentally made a mistake and rolled 401k into roth IRA, and my tax rate is 24%. Is that super stupid or there is a good thing there? I am 38. I understand i will need to pay tax but is there penalty or something.. supper scared
It's not a mistake if it went into an IRA from a Traditional 401k. No taxes on that kind of rollover.
But it went Roth IRA, not traditional IRA😢
@@darineedtippimanchai3865it’s good and bad. Yes you have taxes to pay but if you don’t touch the money where it is now, the compounding interest will be phenomenal by the time you reach 59 1/2 yrs old and it’s all tax free!
Is the 5-year waiting period only for those under 59 1/2 doing the conversion or for anyone?
Depends on how you interpret the tax code. I would consult with your CPA. I prefer to interpret the 5 year rule no matter how old but others say 59.5 is an exception to the rule.
Well it has to go from a 401k to an ira if you leave your company
Only true if less than a certain amount, like 5k or so. Some companies allow you to keep a 401k above this amount.
You can keep your 401k in retirement. You just cannot contribute more to it. You can still reallocate, withdraw or convert funds. Most people convert from a 401k to an IRA after retirement due to limited investment choices in company 401k's.
Okay yes. True. I always rolled to ira,s bc of more choices and to keep things streamlined and a lot less fees
Thanks for commenting!
thank you for your content! call me out if i am wrong! thx! @@yourfinancialekg