Joseph Velson from CA posted over 12 years ago:

Two additional points: 1) your 401k may give you access to institutional funds with extremely low expenses that would not be available in an IRA 2)some 401k plans allow a partial rollover which means that you can keep some of your funds in the plan to take advantage of lower expenses while rolling over the balance for more flexiblility in IRA options.

John Petzinger from CA posted over 12 years ago:

If the 401K contains company stock that has appreciated, it should be possible to transfer non-company-stock assets to an IRA, and company stock to a regular, non-IRA brokerage account. This distribution of the company shares is usually referred to as an "in-kind" distribution, because the shares are not sold but transferred directly into another account. You will have to pay taxes on the COST of the company stock, but not on its full current value. While it usually doesn't make sense to pay taxes any earlier than you have to, if the company stock has appreciated a lot over the years when you accumulated it, then it makes sense, because the difference between cost and current value will 1) not be taxed until you actually sell it, 2) be taxed at the lower capital gains tax rate, 3) may not be taxed at all if you have a net capital loss in the year when it is sold. The first step to finding out whether and in-kind distribution of company shares makes sense, is to find out the acquisition cost of the company shares. If the value minus cost of these shares is a significant fraction of your total 401K balance, say, over 15%, then it probably makes sense to opt for an in-kind distribution of company shares. Since you will be taxed on the cost of the company shares in the tax year when you ask for the transfer, it might make sense to keep everything in the company 401K until the year after you retire, when typically your income and tax rate will be lower.

Neil Hoffmann from PA posted over 12 years ago:

some 401K plans have higher fees and expenses than you can get with IRA accounts at Vanguard or others

Bruce from Vermont posted over 12 years ago:

Just to clarify, my understanding is that if I were to roll over my 401(k) into my existing traditional IRA there are no taxes assessed?

Bruce from Vermont posted over 12 years ago:

Just to clarify, my understanding is that if I were to roll over my 401(k) into my existing traditional IRA there are no taxes assessed?

Charles Rotblut from IL posted over 12 years ago:

Neil, Yes, the rollover is tax-free so long as either do a direct rollover or complete an indirect rollover within a 60-day period. -Charles

James Kim from FL posted over 12 years ago:

is it worth to convert IRA money to roth IRA at age 78?

Mike Woods from TX posted over 12 years ago:

In one of your recent newsletters, it mentioned convert a non-traditional IRA to a ROTh. Does this apply to anyone regardless of income? Are there any charges associated with this type of conversion? Mike

James Kim from FL posted over 12 years ago:

can ira to roth ira conversion can be done only in tax time or any time? Converted roth ira earning can be taxable or free of tax?

Charles Rotblut from IL posted over 12 years ago:

James, You can rollover, convert or contribute to an IRA at any time. The dates only matter as to what tax year the event applies too (e.g. if you convert a traditional IRA to a Roth IRA today, it will impact your 2014 taxes). The capital gains and income you realize in a Roth IRA are tax free. You will owe taxes on the dollar amount of the conversion from a traditional IRA (which was funded with pre-tax dollars) to a Roth IRA (which is funded with post-tax dollars). -Charles

Charles Rotblut from IL posted over 12 years ago:

Mike, We've previously discussed in the AAII Journal converting from a traditional IRA to a Roth IRA. There is not an income limit on these conversions, but you will owe taxes on the amount converted. -Charles

Richard Christoph from CA posted over 12 years ago:

To corroborate and add to Mr. Velson's point: 1. The expenses for funds in my Dignity Health 403B plan administered by Fidelity, are indeed lower than for the same funds in my Rollover IRA. 2. The 403B plan also offers Valic's fixed interest option which, since I do not like bonds or bond funds, is a preferable alternative not available in the Rollover IRA.

Mark from Delaware posted over 11 years ago:

If you elect to retain the 401K after retirement and reach required minimum distribution (rmd) age, you are obligated to take a distribution from the 401K. If you have a 401K and an IRA you must take rmd from each. If you have multiple IRA and multiple 401K you have to take rmd based on aggregate value of the IRAs from as few as any one IRA, but, each 401K individually.

Mark from Delaware posted over 11 years ago:

401K accounts can have stable value funds. These are products that combine a bond portfolio, a cash component for liquidity, and are wrapped with insurance products that absorb market volatility. IRAs cannot hold stable value funds.

Louis Jeffries from MA posted over 11 years ago:

Don't we want the market volatility in a bond portfolio?

Sanford Levey from MA posted over 11 years ago:

So,if you have both an IRA and a 401k an RMD is applicable to each one based on their respective year end values? This being the case the taxes due Would be no greater than if you had all in a 401k or all in an IRA?

Charles Rotblut from IL posted over 11 years ago:

Sanford, You must take RMDs from both. The total amount is the same regardless if your savings are split between the two or are all in one account. The IRS has helpful information on its website.

John from IN posted over 11 years ago:

does a rollover from a 401 trip MAGI levels?

Charles Rotblut from IL posted over 11 years ago:

John, If the 401(k) is rolled over to another 401(k) or a traditional IRA, than it does not affected your taxable income. The reason is that the assets are being moved from tax-deferred account to another. If you rollover a 401(k) to a Roth IRA or two a taxable account, then the balance becomes immediately taxable. The IRS says, "You must include in your gross income distributions from a traditional IRA that you would have had to include in income if you had not converted them into a Roth IRA. These amounts are normally included in income on your return for the year that you converted them from a traditional IRA to a Roth IRA." -Charles

Leonard Conrad from IL posted over 11 years ago:

Not discussed but an IRA can give you more flexibility in designating beneficiaries as no spousal consent is required as is often necessary with 401(k) or 403(b) plans.

Donald Myers from AZ posted over 11 years ago:

I have done and am still doing these: (1) conversions from IRA to a Roth IRA, (2) moving funds from 403b, 401a accounts with former employer. Whether it is good or bad depends on your personal situation, such as rules & limitations put in place by your former employer, laws in the state of your residence, what you want to do about your heirs. In my case I get some state tax exemption ($2500/year) for my RMD from my 403b/401a accounts. In some other states all such income might be state income tax exempt. RMD from an IRA would not qualify in either case. In some states IRA's are shielded from bankrupty and other legal claims (also more often true for RMD from 401k's, 401a's and 403b's) but not all states so check the laws. As noted above what ever you convert from a regular IRA to a Roth is immediately taxable so you want to time it right. Your heirs will likely have better provisions if they inherit a Roth than if they inherit a regular IRA (non-spousal heirs). It appears that one should start conversions before retirement but I didn't and still thought it was a good decision. There have been a few years you could take contributions to charity from an IRA and count it as part or all of the RMD but that law has expired several times or was re-instated only at the last moment.