Author Topic: Should I wait to rollover my 401k?  (Read 674 times)

imadandylion

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Should I wait to rollover my 401k?
« on: May 29, 2020, 12:04:20 PM »
Sorry if this is a dumb question/if the answer is obvious, but I have a 401k (traditional) with a previous employer. I want to roll it over into my IRA (roth) eventually, but I'm curious if I should wait considering the markets are down. My question is, if the funds are removed from certain investments and reinvested into other ones that are offered in the IRA, some which may be different, would I lose money by having to reinvest during this process?  Are the concerns valid or will it be fine?

MDM

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Re: Should I wait to rollover my 401k?
« Reply #1 on: May 29, 2020, 12:37:39 PM »
Sorry if this is a dumb question/if the answer is obvious, but I have a 401k (traditional) with a previous employer. I want to roll it over into my IRA (roth) eventually, but I'm curious if I should wait considering the markets are down.
The main consideration for a traditional to Roth conversion is picking the years in which your marginal tax rate will be lowest.  See Traditional versus Roth - Bogleheads.  If the marginal rates are favorable, converting when the market is down is a good thing because you get to convert a larger fraction of the account.

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My question is, if the funds are removed from certain investments and reinvested into other ones that are offered in the IRA, some which may be different, would I lose money by having to reinvest during this process?  Are the concerns valid or will it be fine?
If you can "exchange" funds then there is no problem.  Here, an "exchange" means the sale of one fund and the purchase of another occurs simultaneously.  This can happen at a brokerage when you are exchanging one (or more) of that brokerage's funds for another, e.g., Fidelity funds at Fidelity, Vanguard funds at Vanguard, etc.

If some time must elapse between sale and purchase, then you will gain or lose in proportion to whether the market loses or gains during that time.

imadandylion

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Re: Should I wait to rollover my 401k?
« Reply #2 on: May 29, 2020, 06:11:15 PM »
Great info, I didn't consider some of those things. Glad I asked here. Thank you! :)