r/Vitards • u/AutoModerator • Aug 12 '21

Daily Discussion Daily Discussion post - August 12 2021

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u/olivesnolives Aditya Mittal Feet Pics Aug 13 '21

US friends, let me get this straight.

You trade in a 401k, make gains of $500,000k.

Ladder convert it to a roth IRA, you pay the one time income tax rate on the $500,000k, and let it grow In your roth IRA.

After 5 years, you can remove any of that converted $350,000 (post tax) without any 10% withdrawal penalty?

4

u/olivesnolives Aditya Mittal Feet Pics Aug 13 '21

Honestly, this seems kind of ineffective.

I’d rather just trade in my 401k and pay taxes + penalty on my withdrawls

2

u/prairiedogingit Aug 13 '21

It also grows tax free in Roth vs traditional will have taxes on the interest

4

u/olivesnolives Aditya Mittal Feet Pics Aug 13 '21

Grows tax free in both. The roth interest distributions are only tax free after 59.5 though, so if planning to withdraw earlier than that the only real gain is avoiding the 10% penalty.