How to Convert 401k to Roth Ira Fidelity

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To convert your 401(k) to a Roth IRA at Fidelity, you’ll need to first meet eligibility requirements, which include being employed by a company that offers a 401(k) plan and having earned income. You can then initiate the conversion process by contacting Fidelity and providing your 401(k) account information. Fidelity will guide you through the steps and provide necessary documentation. Remember that converting to a Roth IRA means paying taxes on the amount converted, but it can offer tax benefits in the long run.

Eligibility Requirements for Roth IRA Conversion

Before converting your 401(k) to a Roth IRA, confirm that you meet the eligibility criteria.

  • Income Threshold: You must have a modified adjusted gross income (MAGI) below the IRS limits. For 2023, the limits are:

    •       • $138,000 for single filers

          • $218,000 for married couples filing jointly

  • Age Requirement: You must be at least 59½ years old or meet an exception, such as disability.
  • IRA Ownership: You must have an existing Roth IRA to receive the converted funds.
Conversion Type Eligibility Requirement
Regular Conversion Income threshold and age requirement met
Backdoor Conversion Income threshold exceeded; convert funds to a traditional IRA first, then to a Roth IRA

Tax Implications of Converting 401(k) to Roth IRA

Converting a 401(k) to a Roth IRA has tax implications that you should consider carefully before making a decision. Here are some of the key tax implications to be aware of:

  • Income Tax: The full amount of the converted funds is included in your gross income for the year of the conversion, which may result in a higher tax bill.
  • No Future Taxes: After you convert to a Roth IRA, qualified withdrawals in retirement are tax-free.
  • 10% Penalty: If you withdraw Roth IRA funds before age 59½, you may be subject to a 10% penalty in addition to income tax on the withdrawn amount.

It’s important to remember that the tax implications of a 401(k) to Roth IRA conversion can be complex and vary depending on your specific situation. It’s advisable to consult with a financial advisor or tax professional to determine the potential tax consequences before making a conversion.

Tax Implications of 401(k) to Roth IRA Conversion
401(k) Roth IRA
Contributions Pre-tax Post-tax
Withdrawals Taxed as ordinary income Tax-free
10% penalty Applies to withdrawals before age 59½ Applies to withdrawals before age 59½

Rollover Process for 401(k) to Roth IRA Conversion at Fidelity

Step 1: Determine Eligibility

  • Must have a Roth IRA account at Fidelity
  • 401(k) must allow for rollovers
  • Income limits apply for Roth IRA contributions

Step 2: Calculate Tax Implications

Taxes are due on pre-tax 401(k) contributions, while after-tax contributions are not taxed again.

Step 3: Contact Fidelity

  • Call Fidelity at 1-800-FIDELITY (1-800-343-3548)
  • Request a 401(k) to Roth IRA conversion form

Step 4: Complete the Conversion Form

  • Provide the necessary information, including the amount to convert
  • Sign and date the form

Step 5: Submit via Mail or Upload

  • Mail the completed form to Fidelity
  • Upload a scanned copy of the form from your Fidelity account

Step 6: Review and Confirm

Fidelity will process the request and provide confirmation of the conversion.

Tax Treatment 401(k) Contributions Roth IRA Contributions
Pre-tax Taxed upon withdrawal Tax-free upon withdrawal
After-tax Not taxed upon withdrawal Not taxed again

Comparing 401(k) and Roth IRA Investment Options

401(k) and Roth IRAs are both employer-sponsored retirement accounts, but they have some key differences. Here is a table comparing the two investment options:

401(k) Roth IRA
Contributions
  • Made pre-tax
  • Employer may match contributions
  • Made after-tax
  • No employer match
Withdrawals
  • Taxed as ordinary income when withdrawn
  • May be subject to a 10% penalty if withdrawn before age 59½
  • Tax-free when withdrawn
  • No penalty for withdrawals
Eligibility
  • Must be employed by a company that offers a 401(k) plan
  • Age and income limits apply
  • Open to anyone, regardless of employment status
  • Age and income limits apply
Contribution Limits
  • Employee limit: $22,500 in 2023 ($30,000 for those age 50 and older)
  • Employer match limit: $7,500 in 2023
  • Limit for all savers: $6,500 in 2023 ($7,500 for those age 50 and older)
  • Higher income earners may be subject to phase-out limits

Alright folks, that’s the lowdown on converting your 401k to a Roth IRA with Fidelity. Cheers to taking control of your retirement savings and setting yourself up for a more comfortable future. If you’ve got any pressing questions, don’t hesitate to give Fidelity a shout. And remember to drop back by later – we’re always dishing out fresh tips and tricks to keep your retirement planning on track. Keep crushing it, and we’ll be here to help every step of the way!

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