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Navigate rules for Roth IRA rollovers

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in Small Business Tax

Q. I am age 72 and operate a sole proprietorship generating about $50,000 in net income. Can I contribute the $50,000 to my Roth 401(k) and then roll it over tax-free into a Roth IRA? A.T., Reston, Va.

A. Not exactly. First of all, the maximum amount you can contribute to a Roth 401(k) for 2009 is $22,000 ($16,500 for taxpayers who aren’t yet age 50). Second, you must ensure that the plan documents permit in-service withdrawals. Therefore, you may be able to roll over up to $22,000 tax-free to a Roth IRA before Jan. 1, 2010.

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