Lurker,
you can find comprehensive information doing a search in Google.com for "Roth IRA" regretfully those sites seem to be written by the same people who did the IRS forms instructions. <ng>
I did a 401(k) distribution several years ago and if memory serves (an increasingly unlikely proposition as years pass by...) these are the main pointers:
- You cannot go directly from a 401(k) to a Roth Ira.
- You have to go from 401(k) to a Regular IRA first. (And you pay no taxes doing this, but make sure it's a direct transfer: if you receive a check you are prone to lots of problems if you don't do exactly the "right thing")
- Later you can transfer from IRA to Roth IRA. There are several restrictions: a) only once a year, b) adjusted income less than approx. $100K for married couples. c) probably some more, minor ones.
When you transfer from IRA to Roth IRA the WHOLE amount of the transfer is taxed as earned income. (And it's counted in determining the $100K adjusted income I mentioned before. --Most unfair if you ask me)
Same as everybody else I'm no expert in this subject, so make sure you do your due diligence.
Good luck!
H.
Note: When you are moving from IRA to Roth IRA you are basically paying taxes now on your savings in order no to pay taxes in the future on both savings, and subsequent gains.
The government lets you get all your future earnings tax free in exchange of "early payment" of the tax you were deferring in your current IRA.
