Re: 401k and IRA question.

marckassay@[EMAIL PROTECTED]
 wrote:

> Hello, I have invested in my first 401k for one month (January 2008)
> before getting laid off.  Good start for retirement savings, huh!?
> Now that I am doing my 2007 taxes and would like to invest 4k into an
> IRA.  So here are a few questions that I can't seem to get answered
> from what I have read, and forgive me for my ignorance but investing
> is fairly new to me so perhaps in laymen terms would be best.
> What is the best way to rollover my 401k into an IRA or a Roth IRA if
> possible?  I understand that there is a direct rollover plan but I am
> unsure if I can use this to rollover in an IRA and Roth IRA.  And what
> about the fact I started this 401k this year in January, does that
> matter?
> Also is it common to see in ones ****tfolio an IRA and Roth IRA?  I am
> thinking about doing this because I don't know if I would want the tax
> deferred or exempt; which seems to me it's like having one foot on ice
> and the other on fire.

You have two things going on;
If you had earned income in 2007, you may deposit the $4,000 into an 
IRA. How much did you earn in 2007? Do you think you will find a new job 
in 2008? I suggest the deductible IRA for 2007, and request a direct 
transfer of the 401(k) money into that account this year.
My opinion on Roth is that people earning low incomes (15% Federal 
bracket or lower) may be better off with a Roth, others should convert 
based on changes in bracket. Maybe you were in the 25% bracket in 07. 
$4000 will get you back $1000 in taxes. In 08, if you are not employed a 
few months, you may be in the 15% bracket. You convert and pay $600 in 
tax. You are ahead $400. This is a simple example, but should help 
illustrate my thoughts. If you have any follow on questions, come back. 
Those here are kind, knowledgeable, and wish to help.

Joe
www.blog.joetaxpayer.com

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