Shurwest CPA Joe Arsenault discusses options when rolling over a 401K to an IRA after leaving a company.
The option for more people, regardless of income, to convert traditional IRA money into a Roth IRA has received a lot of attention this year.
Now, thanks to the Small Business Jobs and Credit Act of 2010 that was signed into law on Sept. 27, the same opportunity exists for workplace retirement plans.
First a quick IRA refresher. With a traditional IRA, the account grows tax-deferred, meaning that when you withdraw the money, you'll owe taxes at your ordinary income tax rate. Some traditional IRA owners also might be able to deduct their contributions on their tax returns.
A Roth IRA, on the other hand, is never tax deductible. But when you withdraw Roth money in retirement, you won't owe any taxes.
Many workplaces have similar choices in their defined contribution plans, typically known in the private sector as 401(k) plans, or 403(b) plans for nonprofits and 457(b) plans for government offices.
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