Quote:
Originally posted by lytri
You should take your old 401k and roll it into a Traditional IRA. You can do this without paying any penalties. You can not roll it into a Roth IRA without paying penalties though. Because the 401k is a pre-tax account, it needs to be rolled into the pre-tax IRA, which is the traditional, otherwise tax (and probably early recovery) penalties will be assessed. You should also start putting money into the new 401k, to take advantage of your company's matching.
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Rolling it into a roth won't necessarily generate penalties, IF you plan on leaving it in there for five years, or are over 59 1/2.
You will, however, need to report the amount rolled into a roth as taxable income in the year of the rollover. A good time to do this might be if you have huge losses coming through for some reason or another (pass through entities, etc.) and want to offset some of those losses with the gains from the rollover.