Author Topic: Roth pipeline question - is a tIRA necessary?  (Read 1395 times)

aspiringnomad

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Roth pipeline question - is a tIRA necessary?
« on: January 25, 2017, 09:41:23 PM »
I've read up a bit on the mechanics of the 401k to Roth pipeline conversion and think I understand it pretty well, but have some unresolved questions I was hoping the forum could help with:

1) Do you first need to roll your 401k into a Traditional IRA account before beginning your Roth pipeline conversions? I think I read somewhere that you do, but if that was wrong and you can just make conversion withdrawals directly from the 401k to Roth you can probably ignore the next couple questions.
2) Do FIRE'd folks typically roll just the amount they plan to add to the pipeline annually, or their entire 401k account to tIRA in one fell swoop, or is it dependent on the investment options and expense ratios offered by your 401k plan?
3) Finally, if you do need to use a tIRA as an intermediary, can you set up such an account solely for that purpose?

Thanks in advance!

FIPurpose

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Re: Roth pipeline question - is a tIRA necessary?
« Reply #1 on: January 25, 2017, 09:51:22 PM »
I'm pretty sure that you rollover to a tira first. You rollover your needs as that is the amount that will not be penalized in 5 years. I'm not sure why you would want a separate account.

seattlecyclone

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Re: Roth pipeline question - is a tIRA necessary?
« Reply #2 on: January 25, 2017, 11:23:16 PM »
I've read up a bit on the mechanics of the 401k to Roth pipeline conversion and think I understand it pretty well, but have some unresolved questions I was hoping the forum could help with:

1) Do you first need to roll your 401k into a Traditional IRA account before beginning your Roth pipeline conversions? I think I read somewhere that you do, but if that was wrong and you can just make conversion withdrawals directly from the 401k to Roth you can probably ignore the next couple questions.

It's perfectly legal to do a rollover straight from a traditional 401(k) to a Roth IRA.

One thing to look out for would be to check whether your 401(k) allows you to withdraw part of the balance and leave the rest there. Some plans make you take out all of your money once you do any type of withdrawal so they don't have to deal with former employees taking multiple distributions over many years. If that describes your plan, you'll need to roll it over to a traditional IRA because rolling the entire amount to Roth in one year would be very expensive.

aspiringnomad

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Re: Roth pipeline question - is a tIRA necessary?
« Reply #3 on: January 26, 2017, 07:49:17 AM »
I've read up a bit on the mechanics of the 401k to Roth pipeline conversion and think I understand it pretty well, but have some unresolved questions I was hoping the forum could help with:

1) Do you first need to roll your 401k into a Traditional IRA account before beginning your Roth pipeline conversions? I think I read somewhere that you do, but if that was wrong and you can just make conversion withdrawals directly from the 401k to Roth you can probably ignore the next couple questions.

It's perfectly legal to do a rollover straight from a traditional 401(k) to a Roth IRA.

One thing to look out for would be to check whether your 401(k) allows you to withdraw part of the balance and leave the rest there. Some plans make you take out all of your money once you do any type of withdrawal so they don't have to deal with former employees taking multiple distributions over many years. If that describes your plan, you'll need to roll it over to a traditional IRA because rolling the entire amount to Roth in one year would be very expensive.

Thanks, very helpful!