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Ask Kim

How to Roll Over a Roth 401(k)

Because of the different tax treatment, roll the Roth 401(k) money into a Roth IRA.

I have access to a traditional and a Roth 401(k). How much can I contribute to each, and will there be tax issues if I roll the money into an IRA? --Todd Donohue, Potomac Falls, Va.

See Also: Why You Need a Roth IRA

You can split the traditional and Roth contributions to the 401(k) any way you choose, as long as you don’t exceed the $17,500 annual limit ($23,000 if you’re 50 or older). Traditional 401(k) contributions are pretax, and the withdrawals are taxable. You pay taxes on Roth 401(k) contributions, but withdrawals are tax-free in retirement. Because of the different tax treatment, you should roll the traditional 401(k) money into a traditional IRA and the Roth money into a Roth IRA. “That will make record keeping a whole lot easier,” says Stuart Ritter, a certified financial planner with T. Rowe Price.

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