My husband has a 401(k) left from a previous employer. Can we roll that into a Roth IRA? Or can we only put $4,000 in one? He has approximately $23,000 in the 401(k) now, but he cannot contribute any more to it because he is no longer employed by that company.
You generally need to roll 401(k) money over into a traditional IRA first, then convert it to a Roth IRA and pay taxes on the amount you convert. The rollover doesn't count toward the annual $4,000 IRA contribution limit, so your husband can make that new contribution, too.
But the tax law is about to change, which will take away the middle step. Starting January 1, 2008, you can roll the money over directly from a 401(k) into a Roth IRA. You'll still need to pay taxes when you make the rollover.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
To make the switch from the 401(k) to the Roth, your adjusted gross income for the year must be less than $100,000 -- whether you're single or married. But that rule is about to change, too, when the income-level limitation disappears in 2010. At that point, anyone can roll over money from a 401(k) or a traditional IRA into a Roth, regardless of their income.
For more information about the new Roth rollover rules for 2010, see Income Limits on Roths to Change. Also see Everything You Need to Know About IRAs.
-
December 31 RMD Deadline: What to Know and What to DoTax Deadlines The year-end deadline for required minimum distributions is critical for many retirees.
-
Top Tax Stories of 2024 and Key Changes to Watch for 2025Tax News The Kiplinger tax team is looking back at popular tax stories and looking ahead to potential tax changes in the new year.
-
Getting Out of an RMD Penaltyretirement When your brokerage firm miscalculates your required minimum distributions, you have recourse.
-
Borrowers Get More Time to Repay 401(k) Loans
retirement If you leave your job while you have an outstanding 401(k) loan, Uncle Sam now gives you extra time to repay it -- thanks to the new tax law.
-
It’s Not Too Late to Boost Retirement Savings for 2018
retirement Some retirement accounts will accept contributions for 2018 up until the April tax deadline.
-
How to Correct a Mistake on Your RMDs from IRAsretirement If you didn't take out the correct required minimum distribution because your brokerage firm made a mistake, the IRS may show some leniency.
-
Making the Most of a Health Savings Account Once You Turn Age 65
Making Your Money Last You’ll face a stiff penalty and taxes if you tap your health savings account for non-medical expenses before the age of 65. After that, the rules change.
-
Reporting Charitable IRA Distributions on Tax Returns Can Be Confusing
IRAs Taxpayers need to be careful when reporting charitable gifts from their IRA on their tax returns, or they may end up overpaying Uncle Sam.
-
Make the Most of the New Military Retirement Plan
retirement The government is offering a new retirement option so that service members who leave the military before qualifying for a pension can still receive some benefits.
-
How Changes in Income Affect Medicare Premiums
Medicare Medicare beneficiaries can see their premiums go up if their income rises, although for some that increase will be only temporary.
