[USER]

We were told by a tax advisor to not convert our 401k to an IRA or Roth IRA.

Are there any advantages to move the funds from a 401k to IRA?

Also, I’ve told my husband that we should be talking to a financial, not tax, advisor?

TIA

[Mary]

Converting to a traditional roll over IRA has no tax consequences. Converting to a roth counts as a distribution and is taxed as such.

You don’t give us any information about what you are trying to accomplish, or any other pertinent details.

A good financial advisor, AND a good tax preparer are both part of a sound financial planning team.

[Sandy]

Have you done any back door roth ira contributions this year? If so, do not roll the funds out of the 401(k) this year.

Otherwise, in general, as others have noted, an IRA will have more investment options and fees will be different.

You also have easier access to the funds in the event you decide to take a withdraw.

[Ruthy]

I’m not sure if this applies to all 401Ks or only the federal version which is TSP.

But, in doing some research today I discovered when a spouse inherits the TSP account and keeps it there – when that widow / widower dies, non-spouse beneficiaries must take the ALL funds immediately and pay taxes on the full amount immediately.

They cannot roll it over to any other retirement account.

Worth looking into for your 401K.

[Wlamir]

Moving 401 to IRÁ is a good thing as you can consolidate your inactive accounts and have more flexibility with investment choices.

However, conversion to Roth is another story as there are tax implications.

[Ben]

It really depends on what’s your income going to be like and cost of living in retirement.

Not official financial advice but I think you have much more to lose if you have traditional 401k or Ira if you retire in 20-30 years then 5-10 years because I believe that taxes will only go up.

I also believe Roth is better because you have more control on how much you withdraw without worrying about tax implications of a traditional 401k or IRA.

Definitely see a financial advisor over a tax advisor but if your income is super high now the tax advisor may be correct.

If that’s not the case I am sure the financial advisor would echo what I am saying.

[Rebecca]

Rolling pretax 401k funds into a traditional Ira can cause issues later if you ever intend to do back door Roth contributions.

[Steve]

A rollover to an IRA usually reduces the management fees you pay and gives you more investment options.

[Ben]

Are you going to do backdoor roth contributions? If so, the tax professional is correct.

As for conversions, you usually don’t want to do that if it’s a high income year.

[Debbi]

You have more investment options options with the rollover account. If you feel you want to have a financial advisor, make sure to find an independent fiduciary advisor and not one who is recommending high cost investments that they get a commission on.

[Author]

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