What Are 401k Roll to Roth IRA Limits?


As of 2010, there are no limits on how much money you can roll over to a Roth IRA from a 401k. There are no limits on how much you can make to initiate a Roth IRA rollover. And though income limits remain that determine who may contribute to a Roth IRA, high earners can skirt around it with a new loophole. That said, the rollover rules are still quite complicated.

No Income Limits for Rollovers

  • In 2010, the federal government permanently repealed rules that disallowed Roth IRA rollovers for people who earned more than $100,000. Now, anyone may roll over a 401k or traditional IRA into a Roth IRA.

Roth IRAs Income Limits

  • People who file jointly with their spouses need to make less than $167,000 to contribute to a Roth IRA in 2010; for single filers, the limit is $105,000. Those who make too much to open a Roth IRA directly should open a nondeductible traditional IRA first, because it has no income limits. Once the 401k funds are safely deposited, account owners can convert the non-deductible IRA to a Roth IRA. This is allowed because there are now no income limits that bar Roth IRA conversions.

Taxes Due

  • Contributions to 401ks are known as "pretax," because the account owner can write off 100 percent of the deposit each year. Roth contributions are "after-tax," because the account owner deposits income into a Roth IRA after paying taxes on it. Because of this, the IRS wants its taxes back on any 401k funds rolled over to a Roth IRA. People who make the rollover in 2010 may spread out the bill between 2011 and 2012; in subsequent years, the fill tax bill will be due the following year.

Federal Witholding Rules

  • There are two options for rolling over a 401k to a Roth IRA. Account owners can request a direct trustee-to-trustee transfer, or initiate a 60-day rollover, in which they withdraw the money and deposit it themselves at a new institution. Those who go the 60-day-rollover route are subject to 20 percent federal tax withholding; those who use the direct transfer method are exempt.

Related Searches


  • Photo Credit Making a financial plan image by Allen Stoner from Fotolia.com
Promoted By Zergnet


You May Also Like

Related Searches

Check It Out

4 Credit Myths That Are Absolutely False

Is DIY in your DNA? Become part of our maker community.
Submit Your Work!