Re: 401k and IRA question.

marckassay@[EMAIL PROTECTED]
 writes:

> 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

Did you make any IRA contributions in 2007 already (for tax-year
2007)?  (since it was possible to make a contribution in 2007
for tax-year 2006).  If not, you may still make a 2007 contribution.

Were you working someplace in 2007 where
you had access to an employer-sponsored plan (ie. 401k)?
If not, then that 2007 contribution may be deductible on
your 2007 income taxes.  Or you may be able to make a 2007
Roth contribution (very likely a better idea, especially
if your tax bracket in 2007 was low).  But bear in mind
that you have to have earned money in 2007.  Did you?

> 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

If you're no longer with that company where you made that 401k
contribution, you may roll that money over into an IRA, or
into a Roth IRA, though if you roll into a Roth, you'll have
to pay taxes (2008 taxes - not due for a year) on that money.

> Also is it common to see in ones ****tfolio an IRA and Roth IRA?  I am

Sure - why not?  There are times when one is eligible to put
money into one but not the other.  

> 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.

That's actually a risk-lowering move we call "tax diversification"


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