Decode the Jargon: How AI Legalese Decoder Can Help Simplify What to Do With Your 401k
- May 30, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Situation Overview:
I currently have a 401k of about 2k sitting in an account from a former employer. I haven’t worked at that job for about 2 years and have not contributed to that 401k. Instead, I have been contributing to the one where I’m currently working.
## Seeking Recommendations:
I wanted to know what you would recommend I do with my 401k from the former employer. I’m not good with financial things and was looking into a ROTH IRA rollover. I’m trying not to get taxed at all or very minimally because I realistically do not make much of anything right now.
## How AI Legalese Decoder Can Help:
Using the AI Legalese Decoder can assist you in understanding the complex legal jargon related to financial decisions like rollovers and tax implications. By utilizing this tool, you can clarify any confusing terms and ensure that you make informed decisions regarding your 401k. It can provide a simplified explanation of the options available to you, such as whether a ROTH IRA rollover would be beneficial in your specific situation to minimize taxes. This way, you can make a more confident and informed choice regarding your retirement savings.
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If you don’t want to get taxed then roll it over to a Traditional IRA or a current 401k if you have one. Roth conversion will be taxed as income.
Does your current 401k allow you to rollover your old company’s 401k into yours? That would be the easiest.
Or you could do a rollover of your old 401k into a Rollover IRA with a brokerage like Vanguard, Fidelity, Schwab
You may find these links helpful:
– [401(k) Fund Selection Guide](/r/personalfinance/wiki/401k_funds)
– [401(k) FAQs](/r/personalfinance/wiki/401k)
– [“How to handle $”](/r/personalfinance/wiki/commontopics)
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A rollover is not a distribution. You will only pay taxes if you tried to move traditional funds into a Roth. What I recommend is if you have both Roth and traditional funds then open one of each. Your 401K servicer will send two checks regardless if true.
Roll the money over to an IRA. Any Roth money should go to a Roth IRA and any pretax money should go to a traditional IRA. Rolling money to another retirement plan is not a tax event.
roll over to a traditional IRA. don’t bother with that amount with the RothIRA.
Pro-actively roll it over into a traditional IRA. You can decide later if you want to do a Roth conversion.
You should do this soon though, since you’re under the involuntary force out limit so your former employer could force your funds out of the plan into a custodial IRA which would come with a bunch of fees and paperwork for you to access.
Surprised your old employer doesn’t have small balance force outs on. Since it’s under $7k they could just roll you out to an IRA if they wanted to since you’ve terminated
One thought I had for you is that you should actually consider the Roth conversion. I know you said you don’t want to be taxed, but hear me out. When you are making not much money is actually the *best* time to do a Roth conversion, because then you pay taxes in your low tax bracket.
For instance, if you’re entirely within the 10% tax bracket, you would only pay $200 on your $2000 balance. But then, you would never again pay taxes on that money. It could grow much larger by the time you retire, and it would be forever tax free including all gains.
Just something to consider.
You won’t get taxed if you roll it over to another account.
I’d roll it into a Roth since it’s such a small amount. I hope you’re adding elsewhere
I don’t know if I would go through the process of rolling it over for $2K. Early withdraw penalty is 10% and because you make so little right now it would be a good time to take the tax hit.