401K to Roth IRA Rollover Question
Summary of User’s Issue and Solutions Discussed:
- The main problem reported by the user is uncertainty about whether rolling over an old 401k, which contains both Roth and pre-tax contributions, into a Roth IRA will create a traditional IRA for the pre-tax portion.
- Fidelity representatives clarified that a direct rollover to a Roth IRA would not create a new Traditional IRA, but the pre-tax portion would be a taxable event upon conversion to Roth.
- The user was advised to contact Fidelity’s Workplace Investing team for specific details about their spouse’s 401(k) plan and any stipulations that might affect the rollover.
- It was recommended for the user to consult with a qualified tax advisor to understand the tax implications of the rollover and conversion process.
Here’s the full thread
Hey there. Asking this question on behalf of my spouse who has an old Fidelity 401k and a Fidelity Roth IRA. Of the $14,000 of vested funds in the 401k, 70 percent were Roth contributions and 30 percent were employer contributions. We decided that we want to roll this entire 401k into the Roth IRA. By following the steps on the Fidelity website, will it roll the entire amount into the Roth IRA, or will it inadvertently create a traditional IRA for the taxable portion? We want the entire amount to go into the Roth IRA, and we are prepared to pay the tax on the pre-tax portion. We just don’t want to deal with another IRA that we will never touch, and we want tax-free growth on the taxable portion.
Thanks!
Hi, @AndTails (A.T.) 🍉.
We cannot say for sure what type of rollover was processed without reviewing your account, so we suggest contacting our Workplace Investing team at the link below. If prompted, you can say “401(k)” to be routed correctly. The team is available Monday through Friday, 8:30 a.m. to midnight ET.
Contact Us: https://www.fidelity.com/customer-service/contact-us
If we can be of assistance in the future, please don’t hesitate to reach out. We’re happy to help where we can. 🟢
To be sure, we didn’t actually initiate the rollover yet. We just want to verify that following the correct prompts won’t result in the creation of a new Traditional IRA. We just want it to all go into my spouse’s current Roth IRA.
Thanks for following up, @AndTails (A.T.) 🍉 . I’m happy to provide some additional clarification on this.
A direct rollover from a 401(k) plan into a Roth IRA would not result in the creation of a new Traditional IRA. However, when you have pre-tax money in the 401(k) plan that you roll into a Roth IRA, that would be considered a Roth conversion, which is a taxable event. You can learn more about the conversion process through the link below.
Convert an account to a Roth IRA: https://www.fidelity.com/retirement-ira/roth-conversion-checklists
Typically, when rolling over an old 401(k) that has both pre-tax and Roth contributions, the process starts by opening both a Rollover and Roth IRA. From there, the different contribution types can be rolled into their respective IRAs (i.e., pre-tax contributions go to pre-tax IRA while Roth contributions go to Roth IRA). Once this is complete, some or all of the funds can be converted to a Roth IRA or kept in the pre-tax IRA.
Now, as @FidelityLinsey mentioned, it is best to reach out to our Workplace Investing team regarding what is allowed under the parameters of your spouse’s specific plan and the specifics of the conversion should your spouse decide to go that route.
Lastly, it’s important to remember that Fidelity does not provide legal or tax advice; therefore, we highly encourage you to speak with a qualified tax advisor to review your specific situation before proceeding if you have not already done so.
Please let us know if more questions come up. We’re happy to expand where we can! 🟢
Thanks for the info! I’ll be sure to reach out to the Workplace Investing Team to make sure the old 401K doesn’t have any stipulations that would complicate this rollover plan. Appreciate the help!
You’re so welcome, @AndTails (A.T.) 🍉! We’ll be here should any questions come up during the transfer process. 🟢