Need financial advice...good Roth IRA company?

[mommy22pumpkins]

Hello. I was hoping to get some financial advice by someone who is better with money than I am. I had taken a loan from my previous 401K for $25,000 and done home improvements and paid off alot of debt. Then changed jobs so the loans automatically went into default. Now at the end of the year come tax season I am going to owe the 20% taxes and 10% penalty for early withdrawl which will equal about $6000.
I do not have $6000 so I was going to try to roll the remainder of my 401K into a Roth IRA and then make an early withdrawl from it to pay this back. Not only that but I lost my last job and have gotten behind on bills so I will need to take some of it just to catch up and get through Christmas.
I was hoping someone could recommend a good company to use for a Roth IRA. I have no idea if this is a good idea and if it will help me avoid any of the tax penalties or not. I am starting a new job at the end of the month thankfully so won't get behind again on anything hopefully.
Thanks for any advice you could give me.

 

[DawnM]

We use Fidelity and have for 10 years or so.

 

[HeyIt'sMe]

Can you roll 401(k) funds (pre-tax $s) directly into a Roth IRA (post-tax $)? You might have to roll it over to a traditional IRA first and then convert it to a Roth IRA. The laws are always changing so maybe this isn't accurate anymore.

If you can do a direct rollover from a 401(k) to a Roth IRA you will have to pay taxes since you've never paid taxes on the 401(k) money and Roth IRA money is post-tax.

 

[minnie1928]

Hello. I was hoping to get some financial advice by someone who is better with money than I am. I had taken a loan from my previous 401K for $25,000 and done home improvements and paid off alot of debt. Then changed jobs so the loans automatically went into default. Now at the end of the year come tax season I am going to owe the 20% taxes and 10% penalty for early withdrawl which will equal about $6000.
I do not have $6000 so I was going to try to roll the remainder of my 401K into a Roth IRA and then make an early withdrawl from it to pay this back. Not only that but I lost my last job and have gotten behind on bills so I will need to take some of it just to catch up and get through Christmas.
I was hoping someone could recommend a good company to use for a Roth IRA. I have no idea if this is a good idea and if it will help me avoid any of the tax penalties or not. I am starting a new job at the end of the month thankfully so won't get behind again on anything hopefully.
Thanks for any advice you could give me.

I don't think this will work the way you think it will. Converting a 401k to a Roth will create taxable income (your 401k funds were deposited pretax). Also, what is the time limit on the 401k distribution? Do you have to roll the funds before year end or could you wait until your taxes are done to see the true effect and deposit to the IRA then?

 

[wdwfan16]

Vanguard. They have great customer service and will help you make the best decision for your situation.

 

[akcire]

OP-This is not going to work like you think--if you convert 401K to Roth you generate additional tax liability. You need to talk to a tax advisor in your state who can give you advise on your specific situation.

For anyone else who wants a Roth you can open one with most larger banks, or any brokerage houses.

 

[ajpa]

Vanguard. They have great customer service and will help you make the best decision for your situation.

Second this. Low fees too. Also if you go to their website they have a lot of educational materials online that might address your sitch.

 

[PatsMom]

Converting to a Roth won't get you out of the 10% penalty either. There is a clock and if you immediately withdraw the converison, you are still penalized even if there are no gains. The IRS was smart enough to catch on to that game pretty quickly after conversion became an option.

This does highlight why 401(k) loans are not a good idea.

 

[mommy22pumpkins]

Hello thanks for all responses. Yes they are defintiely not the best option. I called and they said I could convert to a Roth IRA and then withdraw what I needed to. But the money withdrawn would be taxed. And there would still be a 10% penalty. But the rest of the money would not be taxed until withdrawn.

 

[allyphoe]

they said I could convert to a Roth IRA and then withdraw what I needed to. But the money withdrawn would be taxed. And there would still be a 10% penalty. But the rest of the money would not be taxed until withdrawn.

That's true of a conversion to a traditional IRA. The above is *not* a correct explanation of the consequences of converting a 401(k) to a Roth IRA.

 

[HelloChum]

We have Fidelity and T.Rowe Price--been happy with both--costumer service with TRowe has been great so far

 

[travelbug]

I like Vanguard best, for the reasons others have already mentioned.