How to roll 401k Into Roth Ira
Rollover old 401k to Roth IRA?
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hey Dustin Tibbets here financial
adviser with jazz wealth managers I hope
you'll check us out jazz wealth managers
calm we manage retirement investments
for individuals but we're laid-back
about it we don't do the typical suit
and tie thing we actually built a TV
studio here instead of an office so that
we could teach our customers really like
doing that and one of the things I want
to teach you guys today
I know I've done a video on this in the
past but we need to talk we got to talk
again here all right look I get this
question a lot I have an old 401k
rollover I would like it to be rolled
over and I say well thank you thanks for
choosing jazz wealth is really exciting
we're gonna go through this whole
process with you I'm very very excited
then they say I would like to roll it
over from the 401k to the Roth IRA I get
it
very attractive vehicle right you know
your taxes out of the way you don't know
if taxes on the growth and everything in
the future it's tax-free yay so can you
do that though you can but here's we can
just hang with me we got we got to do
this here in particular so you can't
actually just roll it directly over so
let's say you've got a 401 K right and
you want to roll this over you no longer
work at the job you have to quit be
fired or retire to be over the age of 59
if you want to roll it over right and
still work there so the 401 K has to go
into what's known as a rollover IRA is a
traditional IRA it's just a word that we
use to to say that it's rolled over so
let's call this a rollover IRA that's
the first step got to do this right and
you know what's funny is I don't know if
anybody would stop you from this this
this is actually an interesting question
if you just tried to rollover your 401k
to a Roth IRA I'm not sure that any
online company would stop you from doing
that and then you would owe taxes on
everything but here's the process if you
do it with me I'm gonna stop you because
the pre-tax money has to go into a
pre-tax account now you know that a
traditional IRA is all pre-tax money
you're gonna pay that tax in the future
if you have a Roth 401k
very popular these days right that money
has to and by the way this applies to
for
three B's things like that as well if
you happen to have those so I'm using
401k today but you can switch out the
numbers this money goes into a Roth IRA
because it's already post tax money so
it has to go into the same account there
so here you haven't paid any tax has to
go into an account that you haven't paid
any tax on over here the Roth 401k money
that's after tax money came out of your
paycheck at your job there that can go
into a Roth IRA
if you would like the 401k money to go
into the Roth IRA you just have to start
this step it's gonna go like this very
simply that's your process now when you
do this part if you now what's called
convert your rollover IRA to a Roth IRA
you will owe taxes on the amount it gets
counted as income right so be very
careful here if you roll over a thousand
dollars it's probably not gonna make a
big deal nobody's really gonna care you
add the thousand dollars so your income
you're not gonna notice it if you have a
$50,000 ir 401k and you try to go to the
Roth IRA directly like I said I don't
think these brokerage firms would
actually stop you from doing that I'm
not sure anybody's gonna call you and
say hey do you know what you're doing
here I think they would just let it
happen so you want to go into the
rollover IRA first then convert to the
Roth here's the kicker though you don't
have to do it all in one right let's say
you have a $50,000 old 401k somewhere
and you realize that 20,000 extra
dollars you could add to your income and
not go into the next tax bracket well
you can actually convert part of your
IRA in one year convert the other part
in the other you don't have to go all or
none on this the moral of today's story
is the pre-tax money goes into a pre-tax
account post tax money goes into a post
tax account and actually if you have
both of those they're going to send two
checks there's going to be one check
that they won't even tell you which one
is it you just gotta know which one it
is they'll have one check which you're
supposed to know goes in that one you
have the other check which you're
supposed to know goes in that one there
they won't send you the money as a whole
they will they will separate it when
they do the rollover so that's the
starting point that middle area there if
you decide to convert that's the key
word there then you you pay the taxes
right you got to make sure you're
willing to pay the taxes
you also don't take the money out to pay
the taxes right you can't do that a lot
of people say should I convert when I
have the money in my bank account or
should I convert when I just want to
pull the money out if you try to take
money out when you convert to the Roth
IRA to pay taxes that money is going to
be penalized as well so you have to do
the conversion when you have the dollars
to pay the tax in your savings account
your checking account or whatever it may
be so I just want to point that out it's
a relatively straightforward video today
but I get that question just tons of
times a week and so I thought well let's
make a video about this try to help
people out a little bit I hope it helped
you and if it did maybe you'll hit the
subscribe button or hit the thumbs up
button if it did if you happen to have
done this and got caught or got in
trouble maybe owed more money than you
thought leave a comment below help
everybody else out so that we understand
what the correct process is and maybe if
you have a horror story to share and
you're willing to share that with us as
well hey you enjoy the rest of your day
will be back again to do this and later
at we're closing beat show 5 o'clock
every day live on our YouTube channel
jazz wealth managers hope you check us
out there and thank you so much for
watching why should you choose jazz
wealth as your retirement or long-term
investing service our portfolios are
managed by us not some faceless mutual
fund manager our private classes will
teach you everything about investing and
getting your dough straight best of all
our fiduciary standard means your best
interests comes before ours
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