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Which account type should I open to complete my 401k rollover?
Most plans we see are Traditional 401k plans, which means you can roll over into a Traditional IRA to avoid taxes. However, if your plan is a Designated Roth Account (like a Roth 401k), you must roll over into a Roth IRA. Lastly, some plans actually allow you contribute both Roth and Traditional funds. In that case, you can open both a Roth IRA and a Traditional IRA account. You also have the option to just open a Roth IRA, but any pre-tax funds (Traditional 401k) rolled into a Roth IRA would be taxable. If you are not sure, just remember that Traditional plans allow you to invest pre-tax dollars, whereas with Roth plans you must invest post-tax dollars. In both cases your account must meet our $500 minimum.
See your rollover options through the IRS' Rollover Chart.
Want to learn more about IRAs? Watch this video from our team: IRAs Explained (Roth, Traditional, and SEP)
Please see the IRS website for more information
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