401K to Roth rollover

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Topic Author
JSCIVALLY
Posts: 13
Joined: Thu Feb 21, 2019 9:31 am
Location: Sparks, Nv

401K to Roth rollover

Post by JSCIVALLY » Tue Aug 13, 2019 10:02 am

Hello I am fairly new here, I will be 59 1/2 next year and I would like to take out 150K out of my 401k and roll that into my rollover IRA each year till I retire or when the 401k is depleted, then take 75k and roll that into my Roth IRA and use the other 75k to pay down debt/taxes with. My wife is a Real estate agent so she pays quarterly taxes, I work for the railroad so I get a W-2, do I have to pay estimated taxes on the rollover or can I wait till the following year to pay taxes on the total amount I rolled over into the rollover IRA. Thank you

[removed all caps from thread title - moderator prudent]
59 yrs old,Train engineer, wife real estate agent, $200k+ year | 401k 6%-$650k UPRR Stock,VIGIX,VTIFX,VTSNX, | Roth 401k 12%-$62k | Roth IRA 7%-$13k VFIAX,VGSTX,VWUSX,VGT | Bills $210k | Fed tax 15%

02nz
Posts: 2125
Joined: Wed Feb 21, 2018 3:17 pm

Re: 401K to Roth rollover

Post by 02nz » Tue Aug 13, 2019 10:10 am

First, rolling over from a 401k plan to a traditional (aka rollover) IRA has no tax implications. You could do it all at once if you wanted.

Only Roth conversions are taxable, and for those you'd want to even them out as much as possible (and also account for other income) to control the taxes. For example, if your wife expects to retire in 3 years, it may be better to wait until then to do Roth conversions. It may not be wise to entirely deplete your 401k/traditional balance so early; by spreading them out, you take advantage of zero- and low-tax space every year and can convert to Roth (or withdraw) at lower tax rates. The optimal approach depends a lot on individual circumstances. You may want to post more detailed info to get better advice: viewtopic.php?t=6212

You can (and probably should) make estimated tax payments on the Roth conversions. If you don't and are not covered by the (rather complex) "safe harbor" rules, you'll owe late penalties to the IRS.

Topic Author
JSCIVALLY
Posts: 13
Joined: Thu Feb 21, 2019 9:31 am
Location: Sparks, Nv

Re: 401K to Roth rollover

Post by JSCIVALLY » Tue Aug 13, 2019 10:40 am

Thank you for the prompt reply. I am trying to look "Down the road" as far as the Medicare cost as far as our taxable income , this is part of the reason I want to move most of the money from my 401k through the Rollover IRA to the Roth IRA by the time I turn 63 years old and also to take advantage of the lower tax rates before they expire at the end of 2025. I estimate starting next year my wife's and my income along with the money I plan on rolling over would be about $350,000 minus exemptions and her business write offs would lower below the limit of $321,450 (2019 tax table, 24%) then when I do turn 63 I would lower the amounts I rollover to keep our taxable income below the $170,000 level for Medicare purposes. The railroad retirement income is projected to be about $80,000 with about 90% of that income that would be taxable income ($72,000) Tier 1 up to 85% taxable and Tier 2 all 100% taxable income. My hope is to have all our investments in tax free accounts by the time I turn 65-70 years old and not worry about taxes or RMD's on that income and keep our Medicare premiums as low as possible. :sharebeer
59 yrs old,Train engineer, wife real estate agent, $200k+ year | 401k 6%-$650k UPRR Stock,VIGIX,VTIFX,VTSNX, | Roth 401k 12%-$62k | Roth IRA 7%-$13k VFIAX,VGSTX,VWUSX,VGT | Bills $210k | Fed tax 15%

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