Hi,
I recently changed jobs and because I am still early in my career, I would like to rollover my traditional 401-K to an existing Roth IRA. I understand the tax consequences of the conversion and I expect to pay the taxes come tax season. I don't think it will put me in a higher tax bracket.. but I would like to know if I can take a withdrawal out of my Roth IRA next year to pay these taxes, since withdrawals on contributions are penalty-free.
Does the money I convert from the traditional 401-K count as as "contribution" to my Roth IRA? If so, would that mean that I would not get hit with any penalties if I withdraw from my Roth IRA next tax season (as long as I am not touching the earnings)?
E.g. If I rollover $40,000 from my traditional 401-K to a Roth IRA now, and my Roth balance during tax season is $40,000 + earnings, can I withdraw some of my contributions to pay off the taxes from the rollover?
Any advice would be greatly appreciated!
Can't speak for state laws. But on the federal side if you take a distribution from a ROTH within 5 years of establishing it, there will be a 10% penalty at a minimum.
You can do what you want to do but:
Taking out RIRA dollars to pay for a T401K conversion to RIRA is working cross-purposes.
Instead: Rollover T401K to TIRA. Let it sit until you have post-tax dollars to rollover to RIRA.
Presumably in retirement you think you will have enough SS/pension/T401K/TIRA income to fill up the lower tax brackets that moving to a RIRA at this juncture makes sense (i.e., don't convert all your assets to Roth).
Is $ converted from T401K1-K counted as a "contribution" to RIRA? No.
All IMHO....GMcK