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Article Date:
January 2015

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Slash Taxes When Rolling Over Your 401(k) Funds: Use This IRA Double-Win Strategy

Estimated tax tip savings: If you’re moving money out of a 401(k) fund, you can save thousands or even tens of thousands in taxes (depending on your investment amount) using a smart roll-forward, roll-backward strategy—from traditional IRA to Roth IRA and back.


Readers of the Tax Reduction Letter may recall our clever strategy for eliminating taxes on your retirement funds by rolling over your traditional IRAs into Roth IRAs. Here’s more good news: you can also use this tax-cutting approach to save big money when rolling over your 401(k). (For background on this approach, see IRA Double-Win Strategy: Minimize Your Taxes Further by Rolling Them Forward and Backward.)


In short, here’s how the process works for traditional IRAs:



You get a tax deduction for your contribution to a traditional IRA.


You convert your traditional IRA into a Roth IRA in a year when you pay little or no tax.


At retirement age, you make qualified withdrawals from your Roth IRA completely tax free.


Now let’s put this brilliant strategy to work for your 401(k) investments and see how much more money you’ll be able to keep ... Log in to view full article.

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