As with all tax and retirement planning strategies, there are a few caveats:

  • Unlike the traditional IRA Roth conversion rules, there is no option to split your tax bill over two years. You will owe the entire tax on whatever amount you convert (remember, Congress is trying to raise some revenue here!).
  • Also unlike traditional IRA Roth conversions, you cannot un-do your conversion next year if you change your mind. Your 401(k) conversion is permanent.
  • Both the Roth 401(k) plan and the conversion option must be included in your employer’s plan offering for you to take advantage of this strategy.

Forbes has a handy online slide show outlining 10 reasons you might want to convert to a Roth IRA. If any of these fit your situation, be sure to consult with a qualified retirement planning and tax specialist before making a move.

For more information on IRAs and 401(k) planning please visit my estate planning website.

Philip J. Kavesh
Nationally recognized attorney helping clients with customized estate planning guidance for over 40 years.
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