New job, no more 401k - (

[gsusser]

I'm changing jobs to one without any kind of savings/investing benefit. I'm trying to decide between a Roth IRA or traditional IRA to take the place of the 401k.

I also would like an opinion about moving my 401k from the job I'm leaving to a traditional IRA. I assume if I move the money to a Roth IRA, I will have to pay taxes now on the amount moved, but I don't know.

I'm 61 and plan to retire in 5 years.

Thanks, glenn

[disneysteve]

I'm changing jobs to one without any kind of savings/investing benefit. I'm trying to decide between a Roth IRA or traditional IRA to take the place of the 401k.

I also would like an opinion about moving my 401k from the job I'm leaving to a traditional IRA. I assume if I move the money to a Roth IRA, I will have to pay taxes now on the amount moved, but I don't know.

I'm 61 and plan to retire in 5 years.

Thanks, glenn

Hi Glenn. Welcome to the site!

Whether to go with a traditional or a Roth depends on a number of factors. First, are you eligible for the deduction from a traditional? Do you expect your post-retirement tax bracket to be higher, lower, or the same as it is now? Do you anticipate needing to draw from this account early in your retirement or might you be able to leave that money there longer term?

Since you already have a 401K and are close to retiring, I'm going to assume that what goes into an IRA over the next 5 years would only represent a small portion of your retirement portfolio. That being the case, a Roth might be good since it has no required minimum distribution (RMD). If you don't need that money before age 70, you don't have to take it out and can leave it to continue to grow tax-free. If you never need it, it can pass to your heirs upon your death. With a traditional IRA, you must take RMDs whether you need them or not.

As for rolling over your 401k, you would need to pay taxes to convert that into a Roth.

One other thing to think about is that the contribution limit for IRAs is much lower than for 401ks - $6,500/year for folks over 50 this year. If you were putting more than that in your 401K, you'll also need to find a way to invest the balance of that money. It will have to be in a taxable account but using tax-efficient funds or ETFs can help lessen the tax impact.

[gsusser]

Many thanks Steve although I am a little dismayed that this job change is gonna cost me money.

For whatever reason, I just assumed that I would be given the opportunity to transfer all my 401k money to an IRA. I guess not. And I thought the annual limit for IRA's was about $17k?

Is one alternative to leave the 401k money where it is, my soon to be former employer? However, I hate to do that because the plan fees are so onerous.

[disneysteve]

Many thanks Steve although I am a little dismayed that this job change is gonna cost me money.

For whatever reason, I just assumed that I would be given the opportunity to transfer all my 401k money to an IRA. I guess not. And I thought the annual limit for IRA's was about $17k?

Is one alternative to leave the 401k money where it is, my soon to be former employer? However, I hate to do that because the plan fees are so onerous.

You can transfer all of your 401k money to an IRA. Rollovers don't count regarding the contribution limit. That is just how much new money you can contribute each year. So you could roll over $1 million and still contribute $6,500 for the year. I wish the IRA limit was 17K but sadly not.

You can certainly leave your 401k right where it is if you are happy with the investment options and performance. You don't have to move it. The only possible exception is if it is a relatively small amount they could require you to move it but it sounds like you have a substantial investment there. It's usually only little accounts, like 5K or less, that they might force you to move.

[bUU]

As for rolling over your 401k, you would need to pay taxes to convert that into a Roth.

Many thanks Steve although I am a little dismayed that this job change is gonna cost me money. For whatever reason, I just assumed that I would be given the opportunity to transfer all my 401k money to an IRA. I guess not.

Just to be clear... you pay tax to roll your 401k into a Roth IRA. You do not pay tax to roll your 401k into a traditional IRA.

[gloria7819]

Hi Glenn. Welcome to the site!

Whether to go with a traditional or a Roth depends on a number of factors. First, are you eligible for the deduction from a traditional? Do you expect your post-retirement tax bracket to be higher, lower, or the same as it is now? Do you anticipate needing to draw from this account early in your retirement or might you be able to leave that money there longer term?

Since you already have a 401K and are close to retiring, I'm going to assume that what goes into an IRA over the next 5 years would only represent a small portion of your retirement portfolio. That being the case, a Roth might be good since it has no required minimum distribution (RMD). If you don't need that money before age 70, you don't have to take it out and can leave it to continue to grow tax-free. If you never need it, it can pass to your heirs upon your death. With a traditional IRA, you must take RMDs whether you need them or not.

As for rolling over your 401k, you would need to pay taxes to convert that into a Roth.

One other thing to think about is that the contribution limit for IRAs is much lower than for 401ks - $6,500/year for folks over 50 this year. If you were putting more than that in your 401K, you'll also need to find a way to invest the balance of that money. It will have to be in a taxable account but using tax-efficient funds or ETFs can help lessen the tax impact.

Don't see what could be added here! This is very sound and thorough advice.

[scottgriffin]

Keep Looking For What You Want

That was my same scenario when I got a new job. I had to go out and find a retirement business and create my own customized retirement plan.