<zewcrew@[EMAIL PROTECTED]
> wrote
> I'm looking for a little advice on what I should do with
> money I have
> in a 401A.
To add to Joe's note: Starting on January 1 of 2008, one can
rollover directly one's qualified retirement plan to a Roth
IRA. But by going directly to a Roth IRA, the rollover
counts as income, and you will owe federal taxes on the
whole $16k, plus you may be bumped into the next tax
bracket. Going a little into the next tax bracket is barely
perceptible as a financial matter, but going a lot may
result in paying more taxes than necessary in the coming
years.
As Joe suggested, it's usually best to rollover to a
Traditional IRA (resulting in no Federal Taxes for the year
of the rollover), then do partial conversions of the
Traditional IRA to a Roth IRA such that you just graze the
top of the tax bracket in which you'd be without the partial
conversion.
I have used the free online tax calculators at dinkytown.com
to help compute the "optimal" amount to convert from my Trad
IRA to my Roth IRA each year. For 2008, see
http://dinkytown.com/java/Tax10402008.html
. The "Income"
section has a place for "Taxable IRA distributions." This is
where you put any amount that is going to the Roth IRA from
either a Traditional IRA or your 401(a).
Here's a little more elaboration:
http://www.complianceheadquarters.com/ComplianceArticles/IRA_102307.aspx
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