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Posted by Dilip V. Sarwate on February 11, 2008, 2:17 pm
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IRS Publication 590 (for 2007 tax returns) says that starting
January 1, 2008, money in a 401k plan can be rolled over
directly into a Roth IRA but only by those whose MAGI is
below certain limits (as described in the Publication for
rolling over Traditional IRAs into Roth IRAs). The text makes
no mention (that I could find) of rollovers of Roth 401k money
into a Roth IRA, and so it is unclear to me if MAGI limits also
apply to those wanting to roll over Roth 401k money into a
Roth IRA. If MAGI limits *do* apply, is the only choice to
wait for Tax Year 2010 when MAGI limitations are supposed
to disappear (the 401k trustee will not be happy because the
rollover is being sought due to separation from service with the
employer), or can the Roth 401k money be rolled over into
a Traditional IRA during 2008 with an increase in IRA basis
equal to the post-tax contribution into the Roth 401k account?
Dilip Sarwate
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