Next Generation Trust Services Advises Investors that Owners of 401(k) Accounts Can Convert Funds into Roth 401(k) at Any Time
Published on February 7, 2013
Former Restrictions Lifted in Fiscal Cliff Bill, Says Administrator of Self-Directed Retirement Accounts. As part of the budget legislation passed on January 1, 2013, owners of traditional 401(k) plans may now convert any amount of those funds into Roth 401(k) designations if these plans are offered by their employers.
As part of the budget legislation passed on January 1, 2013, owners of traditional 401(k) plans may now convert any amount of those funds into Roth 401(k) designations if these plans are offered by their employers. Jaime Raskulinecz, CEO of Next Generation Trust Services, LLC, which manages self-directed retirement plans, explained that this new bill will allow more employees to take advantage of tax-free earnings upon their retirement.
“Conversions to Roth 401(k) plans had previously been limited to certain funds and to plans that allowed the switches,” said Raskulinecz. “Any amount may now be transferred from existing 401(k) accounts into Roth 401(k) plans, which means more people will be able to withdraw tax-free dollars when they retire.” There are currently $5 trillion in employer-sponsored defined benefit contribution plans, with $3.5 trillion of that in 401(k)s.
In traditional 401(k) plans savings grow tax-deferred and taxes are paid on the income when the money is withdrawn. With Roth plans, investors pay taxes on the contributions up front and enjoy tax-free withdrawals later.
Raskulinecz added that in addition to dropping restrictions on the type of funds that can be converted, age limits are also eliminated; therefore, younger employees may wish to convert some of their 401(k) funds to Roth plans, and allow the money to earn tax-free interest over a longer period of time.
Next Generation Trust Service’s clients own self-directed retirement plans, in which the investors make all their own investment decisions and may invest in a broad array of nontraditional assets such as real estate, tax liens, precious metals, loans, and much more. Next Generation Trust holds the assets and manages all the transactions for its clients to ensure transactions are done securely and in full compliance with IRS regulations. Self-employed consultants, sole proprietors, and contractors may open self-directed single 401(k) plans for themselves.
“Just as we caution our clients with self-directed retirement accounts to do their due diligence and research their investments fully, we also caution employees with 401(k) plans to ask a lot of questions and make sure that converting funds to a Roth401(k) makes sense for them,” said Raskulinecz. “Individual circumstances and financial goals differ and we strongly recommend people consult their financial advisors before converting any funds.”
Next Generation Trust Services offers free educational seminars and webinars throughout the year to help investors and their trusted advisors learn more about the growing trend toward self-direction as a retirement strategy. The firm’s popular series, Self-Directed 101 and Self-Directed 201 continue monthly on Wednesdays; a full schedule of upcoming events is available at http://NextGenerationTrust.com/events.