401(k) distribution to Roth IRA?
I’m 23 years old.
I left my employer and ashed out my 401(k) with the employer.
I had only pre-tax money in the 401k. All contribtutions and earnings were pre-tax.
There was no Roth 401k contributions or Roth 401k earnings in the 401k.
The 401k company sent me a check for the proceeds of the distribution.
Federal and state taxes were withheld from the distribution.
I deposited the check for the net proceeds = [gross distribution – federal tax withholding – state tax withholding] into my checking account.
Can I now write a check for the gross distribution and deposit it into a new Roth IRA?
In other words, can I convert this pre-tax 401(k) into a Roth IRA via what is a rollover?
Thank you in advance for your help.
Permalink Submitted by Robert Wright on Mon, 2019-01-21 22:42
There is a typo in my submission.It should say”I left my employer and cashed out my 401(k) with the employer.”
Permalink Submitted by Alan - IRA critic on Mon, 2019-01-21 22:59
Yes, you can do that. However, if the balance is large you may be better off not converting the entire amount in a single year since your marginal tax rate could increase. You could split the distribution between a TIRA and Roth IRA in any proportion you wanted, and could then convert more from your TIRA later on. Either way, you need to replace the dollars withheld using other funds to make a complete rollover and prevent the withheld amount from being subject to penalty as well as ordinary taxes.
Permalink Submitted by David Mertz on Mon, 2019-01-21 23:34
The deadline for completing this rollover to a traditional or Roth IRA (or a combination of the two) is the 60th day following the date you received the distribution from the 401(k).
Permalink Submitted by Robert Wright on Tue, 2019-01-22 18:54
Thanks, as always, Alan.