Old 401k Rollover to Roth IRA & contribution limit

Investing
#1

Hi Jeremy - First, thank you for this community. It’s super helpful to have.

Here’s my question:
I’m in my late 20s and I switched jobs about 3 years ago and my last job used Fidelity for my 401k plan. I have a little over ~$50k in it and haven’t done anything with it since changing jobs. I currently max out my 401k with my company’s current provider, Transamerica. Transamerica has fees and I don’t want to put my balance from my fidelity 401k in there. I also don’t invest elsewhere. However, I want to begin to invest more and I want to take advantage of the $6k contribution limit for this year’s taxes and open a Roth IRA. The question is – do I roll my Fidelity 401k balance into a new Roth IRA to start? And if I do, can I also contribute an additional $6k for this tax year? My understanding is that you get taxed when you open a Roth IRA so my confusion is whether I’d be taxed on the $50k 401k rollover balance or no because it’s a rollover, and I’d only get taxed on the $6k that I contribute?

Thanks for your help.

#2

Rollovers don’t count toward the contribution limit. So you can rollover your old employers 401k to a rollover IRA (or to a Roth IRA if it was a Roth 401k). Then you can also open a Roth IRA and contribute the $6K max. I would do both of those things if I were in your shoes! :slight_smile:

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