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Ask The Experts: Can I Roll My 401(k) Into a Roth IRA?

Two days before Christmas, my company sent an email informing us that they will not be matching our 401(K) contributions in 2009. I am wondering if I should roll my money into a Roth IRA? If so, what things I should be aware of? Thanks for your time and consideration! –Erin, WI

Erin: You cannot roll your 401(k) money directly to a Roth IRA. You would have to transfer the 401(k) money to a rollover IRA and then convert it to a Roth IRA.

However, just because your company will not be making matching contributions to your 401(k) doesn't mean you should discontinue making contributiions to it. The upside of this cutback is that the alternative was most likely an employee layoff so people are staying employed when your company cuts back on fringe benefits.

The downside of this reduction is that you will miss out on years of tax deferred compounding and growth on the money your company would have made. So, if you can, save a higher percentage of your salary or invest more aggressively to make up for this shortfall in your 401(k).

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Bill Losey, CFP®, CSA, America's Retirement Strategist®, is the resident retirement planning

expert on CNBC’s “On the Money”. He has been named one of America’s Top Financial Planners and is the author of Retire in a Weekend! The Baby Boomer’s Guide to Making Work Optional. He also publishes Retirement Intelligence, a free weekly award-winning newsletter. Bill can be reached online at www.MyRetirementSuccess.com.