A reader writes that her “advisors” told her she could not convert her 401(k) from a previous employer straight into a Roth IRA. That was the case last year, but starting Jan. 1 it’s now possible, thanks to the Pension Protection Act.
Doing so, you have to pay the taxes on the 401(k) balance (just like a regular full withdrawal). And since your adjusted gross income must be under $100,000 to be eligible for a Roth IRA, and that 401(k) balance will show up as income, make sure your year’s adjusted gross income will be under $100,000 before doing so.
Otherwise, roll the 401(k) into a tradtional IRA and convert a little at a time into a Roth IRA… enough to keep you under the $100,000 limit.
