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So you are paying lump-sum taxes on X amount to store it in a Roth IRA for 5 years so that you get five years of tax-free growth in the Roth.
by SavantIdiot 5y ago
So you are paying lump-sum taxes on X amount to store it in a Roth IRA for 5 years so that you get five years of tax-free growth in the Roth.
- stu2b50 5y agoNo, you're doing it because you can withdraw contributions from a Roth IRA with no penalty. The Roth IRA merely exists as a vehicle to get money out of a 401k with no penalty. In this situation, there is no difference from if you were actually retirement age and withdrawing from your 401k. Same taxes, no penalty.
- SavantIdiot 5y agoThe light just went on. Got it. Thanks for the explaining.
- SavantIdiot 5y agoHey just wanted to say thanks for explaining that. I had a talk with my RIA and he never suggested it because my position for the past decade of working with him has consistently been that I would be working past IRA penalty age so it wasn't an issue. But we are considering it for other reasons now that I know it exists (e.g., early retirement).