Should I roll my Traditional 401(k) into a Roth 401(K)? (#363)

Financial Advisors Say The Darndest Things

In this episode of Financial Advisors Say The Darndest Things, host A.B. Ridgeway breaks down a complex financial decision faced by many: should you roll your traditional 401k into a Roth? A listener from Dallas, Texas, asks whether it makes sense to convert her traditional 401k, with a large tax bill looming over her decision. A.B. provides expert insights into both the benefits and the potential drawbacks of making such a move.

Key Takeaways:

1. Tax Implications: Rolling over a traditional 401k into a Roth triggers taxes immediately, which could amount to a significant bill depending on the total assets. In this case, it could be as high as $300,000.
2. Long-Term Planning: If you expect a higher tax rate in the future, converting to a Roth 401k could save you on taxes when you withdraw the money in retirement. This may be advantageous if your income will be lower after you retire.
3. Company-Specific Options: Not all companies offer the option to roll over a traditional 401k into a Roth. You may need to check with your HR department to confirm what options are available for Roth In-Plan Conversions.

Quotes:

1. "A Roth In-Plan Conversion allows you to elect to convert any or all of your pre-tax assets to Roth assets. This gives you the chance to build tax-free retirement income." – A.B. Ridgeway
2. "If we put it into a Roth, we can get it tax-free after five years." – A.B. Ridgeway
3. "Make sure you check your company benefits or maybe check in with your human resource department to see if that's even available." – A.B. Ridgeway

Catch this episode for a deep dive into the intricacies of Roth 401k conversions and how to weigh the financial pros and cons!

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*Disclaimer: This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy or the completeness of any description of securities, markets or developments mentioned. This is strictly for information purposes. We recommend you speak with a professional financial advisor.

Video/Audio Credit: Dave Ramsey Solutions