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re: Switching jobs and 401k question

Posted on 5/19/15 at 4:19 pm to
Posted by kennypowers816
New Orleans
Member since Jan 2010
2446 posts
Posted on 5/19/15 at 4:19 pm to
quote:

why traditional? It seems that rolling into a roth has more benefits, such as tax free distributions.

I've also read that if I expect to be in a higher bracket when I retire, then I should rollover to a roth. I would think that I would be making more money at that age?


That is all correct. But the benefit of rolling it into a traditional IRA is that you don't get the tax burden right now. If you roll it into a Roth IRA, you will get hit with the tax burden this year.

Simply put:
Traditional = no tax now, taxed distributions (ie in 30 years)
Roth = taxed now, no tax on distributions

Generally speaking, if you have a long time until retirement and aren't making a ton of money now, I would roll to a Roth, pay the taxes now and get the tax-free income upon retirement.

quote:

I was looking on vanguard to roll over my 401k, which funds do I choose? I honestly have no idea.


If you truly have no idea and just want to "set it and forget it," just go with a Target Date Fund for now. For example, if you're 30 right now and want to retire when you're 65, go with the 2050 target fund VFIFX

If you want more risk for now and plan to adjust it as you get older, you're probably alright sinking it into a total stock market index fund VTSMX
Posted by 337tigergirl
Houston
Member since Jan 2012
6556 posts
Posted on 5/19/15 at 5:52 pm to
Thanks Kenny powers!

I'm probably going to roll it into a Roth IRA. I don't make that much now and i will probably be making more. I'm about to be 30 but I want a fund with more risk right now so I will probably go with your second option.

1 more question please... Will the tax money come out of the amount I deposit? Or will I have to fork over some cash? I have $7133 to roll over
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