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Should I rollover into Traditional or Roth IRA?

April 26, 2017Business Finance personal finance rollover roth ira traditional

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Should I rollover into Traditional or Roth IRA?

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If you rollover your 401(k) plan into a Roth IRA you will have to pay taxes on all your contributions and capital gains. However, when you pull your money out of the Roth at Retirement time you will not have to pay any taxes on your withdrawals. If you rollover your 401(k) into a traditional IRA you will not have to pay any taxes up front, however after you make withdrawals in retirement you will have to pay taxes on everything you withdraw. The bottomline is taxes, pay them now with the Roth rollover or pay them later with a Traditional. Given the small amount that you have to rollover I would recommend that you take the Roth route it will not affect your tax liability that much anyhow, and hopefully when you retire it will be significantly more and tax free.