Rollover 401k into Roth IRA?
I'm a bit overwhelmed after looking up information regarding rollover of my 401k into a Roth IRA. If I'm to be honest with myself, I'm not knowledgeable in the personal finance subject and really just need a couple of questions answered in simple terms.
I have no finance background and am fairly new to investing.
I have a 401k that is currently inactive. I haven't rolled it over to a new account after leaving my last job in 2011, so it hasn't grown.
In the next few years, I'd like to buy a house and would like to use my future Roth savings to put towards a down payment.
Ideally what I would like to do is take some of my money from my bank accounts and max out my Roth IRA contributions from 2015. Also, I'd like to rollover the ,000 that I have in the inactive 401k into the same Roth.
I've never owned a house and I believe you can use the money from the Roth towards the purchase of your first property.
So here are my questions:
Can I contribute .5k into a Roth for 2015 from my personal checking account? If so, will i be hit with fees? I don't think so because I already paid taxes on the money in my bank account and Roth is after tax.
What is the best approach to rollover my 401k with k into the same Roth IRA? Is the backdoor Roth method real and should I consider it?
I will most likely have more questions later, bu this is a good start.
(2)2 Comments
Sorted by latest first Latest Oldest Best
For #1 , I see no advantage in putting money from your non-retirement savings into a Roth just for the purpose of using it as a down payment on your house. Why not just put the .5K directly toward the down payment?
For #2 , dollars converted from a traditional 401K or IRA to a Roth are considered income, and will be taxed at your marginal rate. So if your marginal tax rate is 25%, you will need to pay K in order to convert the K. Usually this payment is done independent of the conversion amount--in other words, you would convert the full K but pay the K in taxes out of other funds (checking/savings).
Based on your stated goals of using the money for a down payment on a house, I don't see any advantage to contributing (or converting) to a Roth IRA.
There is some advantage to putting your house downpayment in the Roth to get tax-free growth. However this advantage is offset by the risk of the investment losing value in the short period before you take advantage of it. You might go this route if the timeline is greater than 5 years and you use a conservative investment vehicle.
Terms of Use Privacy policy Contact About Cancellation policy © freshhoot.com2026 All Rights reserved.