Originally Posted by
Blueskies21
I generally agree with you TalkTurkey, in this case I have some additional clarifications...
If you roll your 401K to a Roth IRA, you will generate a tax bill at your current marginal rate. If you've got 10k and in a 25% bracket, it's a $2,500 tax bill. If you've got 50k and a 25% bracket it's a $12,500 tax bill, certainly something to consider before you make that conversion. As well, you need to have that money outside of your 401k, if you pay the conversion tax bill out of the 401k itself you would also pay a 10% early withdraw penalty.
Lastly, at the point you terminate your employment with Endeavor your vesting schedule is frozen where it is regardless of whether you roll your plan at that point. I.e. if you're 50% vested and roll immediately, that's the same as if you left it for 3 more years and then rolled. You don't continue to vest.
Copy that. So non-vested is lost. That’s understood. When I rolled over my money, I got no bill of any sort. I know when I retire, the initial rollover amount as reported to IRS will be taxed at my applicable rate. That’s understood. But that money, since rolled into an IRA has been invested many times over and has produced a lot more value in gains and dividends which in an IRA are not taxable.
So let’s say I rolled over that 10k and will await the 2500 tax bill. That 10k has multiplied a few times over in my IRA and all I have to pay is that measly 2500. Sold.