Rollovers
Converting Your 401(k) to a Roth IRA: Tax Impact & Strategies
Planning a job transition or retirement? Here is how to evaluate the upfront taxes of rolling over a pre-tax 401(k) into a Roth IRA.
By Marcus Vance, CPA
When Does a Rollover Conversion Make Sense?
When leaving an employer, you have options for your old 401(k). Rolling it over into a Traditional IRA is a non-taxable event. However, converting that balance to a Roth IRA accelerates taxes today in exchange for a lifetime of tax-free growth.
Best times to execute conversions:
- During low-income gap years between jobs.
- Early in retirement before Social Security and RMDs begin.
- During severe market downturns when asset valuations are depressed.
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