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serbeer
Joined: 28 Dec 2007
Posts: 164
Location: Chicago
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 Posted: Thu May 08, 2008 4:36 pm Post subject: From 401K to Roth IRA? Roth in 1980s??? |
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I read the following article:
http://www.investmentadvisor.c....ticle=8735
which is mostly old news but, among other things, states:
| Quote: | | Another important change affecting retirement planning with Roths is that as of 2008 clients will be allowed to transfer their 401(k) balances directly to a Roth IRA |
Not sure I heard about that. Does she mean it will become possible in 2010 per this year's new law? Or is it possible already in 2008 -- but still is subject to Roth income limits?
Surely high-income individuals cannot convert their 401Ks into Roth IRAs this year.
Also, I was kind very surprised by the concluding remark:
| Quote: | | At the same time, she says Congress acted because members knew there was “pent-up demand from higher-income individuals who have not been able to do tax-deductible IRA contribution since the late 1980s.” |
Weren't Roth IRAs introduced in the 1998? What 1980s have to do with it? |
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jcompton
Joined: 10 Mar 2008
Posts: 111
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| Posted: Thu May 08, 2008 5:08 pm Post subject: Re: From 401K to Roth IRA? Roth in 1980s??? |
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| serbeer wrote: |
Also, I was kind very surprised by the concluding remark:
| Quote: | | At the same time, she says Congress acted because members knew there was “pent-up demand from higher-income individuals who have not been able to do tax-deductible IRA contribution since the late 1980s.” |
Weren't Roth IRAs introduced in the 1998? What 1980s have to do with it? |
You're misinterpreting the remark.
See this site on the history of the IRA...
"The Tax Reform Act of 1986 reversed the trend toward expanded participation by phasing out the deduction for IRA contributions among higher-earning workers who are covered by an employment-based retirement plan themselves or who have a covered spouse."
So it was in the latter half of the 1980s that the income ceiling was put on TIRA deductibility, which indeed did put a crimp in the demand for IRAs among higher-income individuals. Nothing to do with Roth-style rules.
_________________
To save time and redundant posting, here are my positions on two recurring topics: I wish I had paid my mortgage down faster, and focused on TSM after that. |
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serbeer
Joined: 28 Dec 2007
Posts: 164
Location: Chicago
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| Posted: Fri May 09, 2008 1:31 am Post subject: |
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| Quote: | | So it was in the latter half of the 1980s that the income ceiling was put on TIRA deductibility |
I see, thanks for clarification jcompton.
I guess no one on the board sure what the author of the article meant while saying "as of 2008 clients will be allowed to transfer their 401(k) balances directly to a Roth IRA."
Oh well. |
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Sunflower
Joined: 18 Nov 2007
Posts: 86
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| Posted: Fri May 09, 2008 1:49 am Post subject: |
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| serbeer wrote: | | Quote: | | So it was in the latter half of the 1980s that the income ceiling was put on TIRA deductibility |
I see, thanks for clarification jcompton.
I guess no one on the board sure what the author of the article meant while saying "as of 2008 clients will be allowed to transfer their 401(k) balances directly to a Roth IRA."
Oh well. |
Before, you had to rollover to a traditional IRA then to a Roth IRA. They've eliminated the middle step. |
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Default User BR
Joined: 17 Dec 2007
Posts: 529
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| Posted: Fri May 09, 2008 2:12 am Post subject: |
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| serbeer wrote: | | guess no one on the board sure what the author of the article meant while saying "as of 2008 clients will be allowed to transfer their 401(k) balances directly to a Roth IRA." |
See IRS Pub 590:
| Quote: | | Rollovers from other retirement plans. For 2008, you can roll over amounts from an eligible retirement plan into a Roth IRA. For more information, see Rollovers from other retirement plans in chapter 2. |
http://www.irs.gov/publication....tml#d0e124
Brian |
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Spirit Rider
Joined: 02 Mar 2007
Posts: 220
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| Posted: Fri May 09, 2008 8:50 am Post subject: |
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To completely answer your question.
Yes, starting in 2008 you may make a "direct" rollover from a 401K to a Roth IRA.
However, as you alluded to, the income restrictions also apply to direct Roth conversions until 2010. |
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serbeer
Joined: 28 Dec 2007
Posts: 164
Location: Chicago
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| Posted: Fri May 09, 2008 10:59 am Post subject: |
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I understand now.
Thank you for clarification folks! |
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allancoleman
Joined: 11 Sep 2007
Posts: 281
Location: Alaska & Hawaii
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| Posted: Sun May 11, 2008 10:04 am Post subject: |
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Because the majority of my deferred retirement money is in my 401(k) , serbeer , I've gradually getting rid of my IRAs that I was using as that " middle step " for all my Roth conversions in the past . And I'm really looking forward to the ability of being able to transfer money directly from my 401(k) to my Vanguard Roth account later this tax year and being able to do so in the future .
I remember doing our first Roth conversion back in the later 90's when that first Roth conversion regulations allowed us to spread the taxes owed over the next four tax years similer to the one in 2010 where the IRS will allow payment of taxes over the next two tax years in 2011 and 2012 .
More information is available on Roths at :
http://www.rothira.com
where there is also an excellent " message board " link on the left margin of their home page to a discussion board that answers nothing but Roth questions . Most of the people that respond and answer question over there are CPAs and such and are really good . I visit there a lot to learn more about Roths . |
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serbeer
Joined: 28 Dec 2007
Posts: 164
Location: Chicago
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| Posted: Sun May 11, 2008 10:57 am Post subject: |
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| Thank you for the tip allancoleman! |
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allancoleman
Joined: 11 Sep 2007
Posts: 281
Location: Alaska & Hawaii
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| Posted: Sun May 11, 2008 3:10 pm Post subject: |
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| You're more than welcome , serbeer . I frequent that Roth web site and Roth message board daily to learn more about Roths even though I understand them very well now having done almost all kinds of Roth transactions for probably a decade now . And I could easily see myself doing Roth transactions for the next ten years too . Remember , nothing beats taxfree forever under current tax code . |
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Jadzia
Joined: 16 Mar 2007
Posts: 61
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| Posted: Sun May 11, 2008 7:05 pm Post subject: |
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| Are you still only able to transfer money from a 401k if you have left the company? I certainly wish I could move my 401k balance to a better provider, even if it meant keeping the bad plan for current/future contributions. |
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allancoleman
Joined: 11 Sep 2007
Posts: 281
Location: Alaska & Hawaii
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| Posted: Mon May 12, 2008 8:34 am Post subject: |
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| Usually you can't transfer money from your 401(k) , Jadzia , until after seperation or termination from your company's employment . However you should check with your company 401(k) custodian to verify if you are allowed to move money out of your company 401(k) while still employed . We were lucky as my company 401(k) just switched to Vangard for their new fund offerings in June of last year so now we have many Vanguard fund choices right in my 401(k) now too in addition to my own Vanguard personal Roth account . |
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