roll over profit sharing into roth or 401k?

[kenmoremmm]

at my previous employer (2004-2010), we had a company-funded profit sharing plan. i no longer have details of the plan nor do i know my total (since they stopped sending statements). i have been reluctant to contact them to get info in the event it would require me to move my funds before i had a gameplan in place.

i think the plan was funded with pre-tax dollars. and i think my total is somewhere around $120k.

i do recall that it was more of an actively managed plan with a higher percentage of funds allocated to bonds. i seem to recall the annual fees were ~1%+ and the stock/bond ratio around 60/40 or 70/30 as it was covering all employees in the company and more targeted for those nearing retirement.

i think it makes more sense for me to get it into either my roth (vanguard 2045 retirement plan) or my company roth-401k (also VG2045).

i assume during the rollover process, i would have to pay taxes. would these be calculated at my marginal rate? my wife and i will be filing jointly and be in the 25% bracket. are there also cap gains taxes i would need to pay on any dividends? anything else i should consider?

lastly, i'm a little tighter on cash right now than i would like, so is there any way to cash out some of the rollover to pay for the taxes?

thanks

[MDM]

i assume during the rollover process, i would have to pay taxes. would these be calculated at my marginal rate?

Yes, by definition because this would be income on top of whatever other income you have for the year.  It would all be ordinary income, with no favorable capital gains treatment, unless you have a Net Unrealized Appreciation - NUA situation.

Usually (so this may or may not apply to you) doing traditional->Roth conversions while one is employed is not favorable, due to the higher marginal rate that usually entails.  Roth conversions can have a side benefit if one has spare cash to pay the taxes, because in effect that takes cash from a taxable account and gets it into a Roth - but that's not what you have in mind.

The above doom & gloom is, again, what applies to most people.  You may have specific details to be an unusual case.

[SeattleCPA]

If your marginal rate right now is 25%, the $120K will partly be taxed at 25% and partly at 28% probably and maybe even a little bit at 33%.

Unless your taxable income in retirement exceeds $150K a year (so maybe total income in excess for $180K a year?) it sure seems like you ought to just do a trustee to trustee transfer.

Note: I think you need a pretty big tax-deferred savings number to get up into these marginal rates in retirement.

[kenmoremmm]

ironically, i just received a document from my former company a few days ago; first time in years. i attached the nitty gritty. if i understand it correctly, if i rollover into an IRA (not a roth or roth IRA), there are no taxes. is this correct? i've attached the doc in case someone could glance through the language which appears to be boilerplate.

[MDM]

if i rollover into an IRA (not a roth or roth IRA), there are no taxes. is this correct?

Yes.