No More Restrictions on 401(K) to IRA Rollovers ? Hedgeable ...

Senate Fiscal Cliff Bill Ends Restrictions on 401(k) Rollovers

Under the Senate compromise fiscal cliff bill passed this morning, investors with 401(k)s, 403(b)s and other defined contribution plans will be able to convert to a Roth IRA at any time.?Currently, 401(k) plan participants can only roll their money into an IRA when changing jobs, at retirement, or when reaching age 59.5.

Why would they do this and why is it important? Well, money withdrawn from a 401(k) is taxed, so Republicans saw this as part of the ?new revenue? that Speaker Boehner was speaking about when discussing ways to get tax dollars from new sources in the past few weeks. An IRA is generally?preferable?to a 401(k) for retirement investors, because money taken out at retirement is taxed in a 401(k), and for an IRA it is not. Thus, most prefer to pay the taxes up front, rather than in a large lump sum when they need the money most.

Here is what a Senate Republican aide wrote in an email to Investment News:

The conversion is a taxable event. Because of the significant tax benefits of Roth plans, many people are expected to choose to convert their plans to Roth plans. This choice results in new tax revenue today and a significant tax break in the future.

We are excited about this change in policy. Potentially, we could be looking at millions of new IRA Accounts. We will be announcing an exciting Hedgeable promotion in regards to this new policy shortly.

Source: https://www.hedgeable.com/blog/2013/01/no-more-restrictions-on-401k-to-ira-rollovers/

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