investopedia.com/articles/retirement/08/convert-401k-roth.asp
Rolling over a traditional 401(k) into a Roth IRA can be an attractive option. But regardless of the size of your salary, you need to do the rollover strictly by the rules. Since you haven't paid income taxes on that money, you will owe the money for the year in which you roll it over.

If you roll a traditional 401(k) over to a Roth, you will owe income taxes on the money that year. This type of rollover has a particular benefit for high-income earners. The immediate tax bill can be avoided by allocating after-tax funds to Roth IRA.

A traditional 401(k) is funded with the salary from your pre-tax income. You pay no taxes on the money you deposit or the profit it earns until you withdraw the money. Then, you'll owe tax on the entire amount as you make withdrawals. The Roth IRA is funding with post-tax dollars.

If you contributed more than the maximum deductible amount to your 401(k), you've got some post-tax money in there. You may be able to avoid some immediate taxes by allocating the after-tax funds in your retirement plan to a Roth IRA. Alternatively, you can choose to split up your retirement money into two accounts.
Tap to copy the Short Url to this post:
bto.sh/er2ethvw 
All Business News on a Single Page. Join for Free →