401k and new job - what should I do?

[mharr066]

Hi Mustashians! I'm new here and could really use some advice from some MMM experts.

I'm in between jobs and have money in my old 401k. My question is simple: what should I do with it? Should I simply try to roll it into my new 401k or take this opportunity to transition it into a Roth IRA? What considerations should I keep in mind? I'd like to act before the new year in case there are any tax considerations.

A little background, I'm 26 and plan on earning significantly more in the next five years (don't we all!)

Thank you all for your help!

[Allen]

99% of the time the answer to this question is to roll the old 401k into a (traditional) IRA.

Sometimes, if you are really happy with the investment choices in the old plan, and they are very low fee (and you won't be hit with any other weird fees) you might leave it where it is.

[ch12]

The standard MMM advice would be to put your old 401k in a traditional Vanguard IRA. The only reason to convert to a Roth IRA would be if you have very low income this year - lower than your retirement costs - and the tax-deferred money in your old 401k wouldn't make you take a significant tax hit this year.

[Emg03063]

If you have a significant income gap this year and expect your income to be lower than your retirement income, then a Roth conversion makes sense.  Otherwise, roll to a traditional Ira.  Also bear in mind, once you roll to a traditional, you can do a partial Roth conversion if that makes sense.

[eyePod]

If you have a significant income gap this year and expect your income to be lower than your retirement income, then a Roth conversion makes sense.  Otherwise, roll to a traditional Ira.  Also bear in mind, once you roll to a traditional, you can do a partial Roth conversion if that makes sense.

Aren't you still limited by the $5,500 totals? 

[ch12]

If you have a significant income gap this year and expect your income to be lower than your retirement income, then a Roth conversion makes sense.  Otherwise, roll to a traditional Ira.  Also bear in mind, once you roll to a traditional, you can do a partial Roth conversion if that makes sense.

Aren't you still limited by the $5,500 totals?

Rollovers do not count against the $5,500/year contribution limit.