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In addition, having all your money in a 401(k) protects you from the pro-rata rule. ... If you roll over your 401(k) to an IRA (instead of another 401(k) plan), are you alright with losing some of ...
Continue reading → The post Doing a Roth Rollover? Beware the 5-Year Rule appeared first on SmartAsset Blog. ... watch out for the “pro rata” rule in the first five years, which applies to ...
Use a reverse rollover to avoid the pro rata rule If your employer’s 401(k) plan allows you to roll IRA money into it, you can move your deductible IRA contributions and pre-tax earnings into ...
Pro-Rata Rule: If you have other pre-tax IRAs, you may owe taxes on part of the conversion. ... You are in 401(k) plan that allows after-tax contributions and in-service distributions or rollovers ...
The only remaining unprotected areas are the SIMPLE IRA and the SEP IRA. The SEP IRA is functionally similar to a self-settle trust, and a sound policy reason would exist to not shield SEP IRAs, but many financial planners argue that a rollover (or direct transfer) from a SEP IRA to a rollover IRA would give those funds protected status, too.
Beware the pro-rata rule on conversions If you have traditional IRA accounts with deductible contributions, you’ll need to factor that in if you convert any nondeductible amounts into a Roth IRA.
Of the funds in your IRA, 95% are tax-deferred, so when you make a $5,000 distribution to roll over to a Roth IRA, you'll owe tax on 95% of that $5,000, or $4,750. That's on top of paying taxes on ...
The 60-day rollover rule is one of the many traps that lie in wait for investors rolling over a retirement account such as a 401(k) or IRA. You have to follow the rules exactly, or you could end ...