Hello! I wanted to ask about taxes when rolling a 401K into a Fidelity traditional IRA. I know with my current 401K provided by my employer that the money that goes in is not taxed and I will pay taxes when I withdraw at retirement - however, I’m confused about what would happen if I leave the company and roll the money into a Fidelity IRA and want to continue making payments. Would I be going from tax free contributions to taxed contributions and would that mean paying more tax on top of the taxed contributions at the time of retirement? Sorry if this is a stupid question but I’m having a hard time trying to understand how it would work. Appreciate any feedback, thank you!!
Hi @ryanww!
It’s a great question! Thank you for asking it!
Rolling over from a traditional 401k to a traditional IRA is not a taxable event. There are some rules that you must follow in order to ensure the roll over is not taxable. Generally, the benefit administrator and/or your brokerage can help guide you if you ask them along the way. If you made contributions to the IRA going forward, the contributions would be deductible in a similar manner as you have been contributing to your 401k.
Rolling over from a traditional 401k to a Roth IRA is a taxable event. But it sounds like you are not thinking about doing that.
Keep us posted what other questions you have!
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Thank you Shane! Really appreciate the info!
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