Retirement tax questions

The broker and employer were correct.  Because the employer match was contributed pre-tax (not included in your wages), it must go into a pre-tax 401(k) account, even if your own contributions go into an after-tax Roth-option 401(k) account.  You will have to rollover the Roth 401(k) funds into a Roth IRA, and the pre-tax 401(k) funds into a traditional pre-tax IRA**.  

 

After you do the rollover to the pre-tax IRA, you can do the math to think about how much you might want to convert to a Roth IRA, and how fast.  If you spread out the conversions over time, that may lower the tax burden.  Also, there are certain long-term advantages to have some funds in a traditional IRA.  You may want to discuss your options with a financial planner.  

 

**Yes, you could rollover everything into the Roth IRA all at once, but that will result in an immediate conversion with tax due.  If you do a pre-tax rollover to a traditional IRA, you can then take some time to plan the best way to manage those funds.