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Message
re: Various Financial Questions
Posted on 1/3/13 at 10:17 am to Layabout
Posted on 1/3/13 at 10:17 am to Layabout
quote:
You're going to cash out of your existing fund and they will transfer the money to the new fund, which will have its own investment options. When you open the new account you will specify the allocation of incoming monies among the investment options.
Ok, I was confused about that... I thought I had read that if I cashed out, I would then be taxed. But I see what you are saying.
Is there any advantage to paying the taxes now and putting it into a Roth IRA as opposed to a regular IRA?
Posted on 1/3/13 at 11:07 am to Lsut81
quote:
Ok, I was confused about that... I thought I had read that if I cashed out, I would then be taxed. But I see what you are saying.
The new fund would receive the cash but it would be considered a rollover so no tax would be due unless you're rolling it into a Roth IRA.
quote:
Is there any advantage to paying the taxes now and putting it into a Roth IRA as opposed to a regular IRA?
The advantage to a Roth IRA is that you pay no tax on the earnings and the appreciation of the account. If you're a young man, it makes sense to pay the tax up front on your contributions and then pay no tax on the accumulated earnings for 30-40 years. I wish I had had that option when I was younger.
The rules for rolling money into a Roth IRA are somewhat complicated. For one thing, you need to come up with the amount of the income tax out of pocket and not from the account itself. I think I would look at either leaving the money where it is or rolling it into another 401K and then opening a new Roth IRA and making your future contributions to it.
This post was edited on 1/3/13 at 11:13 am
Posted on 1/3/13 at 11:09 am to Lsut81
quote:
Is there any advantage to paying the taxes now and putting it into a Roth IRA as opposed to a regular IRA?
It really depends on your situation. If you are 25 years old it might work better to pay the taxes now and get 30 years of tax free gains. Or you can let this ride and you'll be in a lower tax bracket when you retire as opposed to now.
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