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401k Rollover Question

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  • 401k Rollover Question

    My wife just quit her job and has money in a 401k with her former employer. That 401k was a pretty horrible plan with high expenses and few fund options. I'd like to roll it over in order to give her better fund options and fewer fees. If she isn't planning to go back to work, am I correct that our only option is to roll it over into a traditional IRA? And if so, will her doing so prevent her from being eligible for full Backdoor Roth contributions in the future?

  • #2

    • If your wife is going to get another job, she should place some consideration in finding an employer with a plan she can roll in to.

    • If she r/o to an IRA and does not convert that IRA to a Roth, you are correct that she will not be able to do tax-free backdoor Roth conversions.

    • If there is any chance of self-employment, she needs to set up a SOLO-k and roll her 401k to that. For example, do you get any 1099 income? Could you set up a SOLO-k and hire your wife to do administrative work and, thus, contribute to that 401k? Even a little bit would do the trick.

    Until then, she can either leave the money behind and continue to do backdoor Roths or roll out and hit the pause button on the backdoor Roth contributions.
    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087