What Are Some Options for Roth 401(k) Rollovers?


Quick Answer

Investors seeking to roll over funds from a Roth 401(k) can place savings in a Roth IRA without paying taxes, states Fidelity. Another option is to roll over part of the funds into a traditional IRA, a route made acceptable by the U.S. government in 2015.

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Full Answer

Roth IRAs typically provide more investment opportunities than what standard employer 401(k) plans offer, including Roth 401(k)s, states Vanguard. Unlike an investor with a traditional 401(k), one holding a Roth 401(k) account can roll over funds into a Roth IRA without paying taxes. Transferring funds from a traditional 401(k) into a Roth IRA is called a Roth conversion and requires the investor to pay taxes on the amount he rolls over.

Another option for rolling over funds from a Roth 401(k) is to transfer those funds into a new employer's retirement plan, suggests Investopedia. When securing new employment, funds from a Roth 401(k) can be transferred into an employer-supplied Roth IRA as well as a new Roth 401(k). Before rolling funds over, an investor should strive to have the transfer conducted between trustees instead of having the funds sent directly to him to invest at a later date. This decreases the risk of questions from the IRS at a later date.

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