Can I Roll My Old 401(k) Into a Roth IRA?
Here’s a summary of the main problem and solutions discussed:
- Main Problem: The user is unsure if they can roll over funds from their old company’s 401(k) into a Roth IRA, given the annual contribution limit of $7k and whether their 401(k) is a Roth or pre-tax account.
- Solution 1: If the user has a Roth 401(k), a direct rollover to a Roth IRA would not be taxable. However, rolling over pre-tax funds would be considered a Roth conversion and subject to income tax.
- Solution 2: The rollover does not count towards the annual contribution limit for IRAs, allowing the user to transfer their funds without affecting their contribution capacity.
- Solution 3: To confirm the type of 401(k), the user can check their contributions on NetBenefits.com or contact the Workplace investing team for assistance.
- Solution 4: Typically, employer contributions (matches) are considered pre-tax, so the user should verify this with the 401(k) team for clarity.
Here’s the full thread
Hi, I just moved into a new role at a new company. My new company does not offer a match so I’m not interested in contributing to their 401k.
I still have funds (5-figures) with my old company’s 401k. Can I roll this into my Roth IRA even though it’s about the $7k annual contribution limit?
Hello there, @jake. I’ll provide you with some information.
It’s important to mention that if you have a Roth (after-tax) 401(k) plan, a direct rollover into a Roth IRA would not be a taxable event. However, if you have any 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. In that case, the pre-tax money converted to a Roth account would be subject to earned income tax for the year. If you have questions about your specific situation, it’s always best to consult a tax advisor.
Convert an account to a Roth IRA: https://www.fidelity.com/retirement-ira/roth-conversion-checklists
Ultimately, if you can complete the rollover, I want to point out a couple of things as far as having a Roth IRA. The first is that there are different contribution limits when compared to a 401(k) account. Also, just so you know, the rollover does not count toward your annual contribution limit. You can check out the link below to review your eligibility.
IRA Contribution Limits: https://www.fidelity.com/retirement-ira/contribution-limits-deadlines
The second is that the cash you transfer via a rollover and/or contribute on your own is not automatically invested for you. Therefore, it will be your responsibility to place trades that best suit your goals and strategy. As a reminder, an IRA is considered a tax-deferred retirement plan, so investing within the IRA does not create a taxable event. Instead, distributions from the IRA are reportable and may be taxable depending on whether pre-tax or after-tax assets are being withdrawn.
Investing ideas for your IRA: https://www.fidelity.com/viewpoints/retirement/ira-portfolio
If you have further questions, let us know. We’re happy to help out. 🟢
I’m fairly confident it’s a roth 401k. Where can I confirm that in my profile? I’m not seeing anything in ‘Plan Information’.
Happy to jump in here!
The breakdown of your 401(k) contributions can be found on NetBenefits.com by following these steps (login required):
1. Click on the plan and navigate to the “Summary” page
2. Scroll down to the section labeled “Your Investments”
3. Within the “Sources” section, the different contribution sources (Pre-tax Traditional or Post-tax Roth) can be viewed
4. Click on “Show Details” for more information
If you’re having trouble confirming this information, then we recommend speaking to our Workplace investing team by phone. Associates are available Monday through Friday from 8:30 a.m. to midnight, ET. You can access their number by clicking the link below.
Contact Us: https://www.fidelity.com/customer-service/contact-us
Let us know if you have any questions outside of this; we’re always happy to help. 🟢
Thank you. I see the following:
1. Roth Deferral (70%)
2. Employer Match (29%)
3. Profit Sharing (0.5%)
4. Employee Deferral (0.25%)
Are 2-4 considered roth as well?
Hi, @jake. I’m happy to chime in here.
Typically, your employer contributions (match and non-match) will be part of your pre-tax bucket in your employer plan.
That said, if you’d like to verify this, we recommend reaching out to our 401(k) team using the contact information in the link above.
Feel free to follow up if you have other questions! 🟢