Should I Roll My Traditional 401(k) to a Roth?

[Music] amy is in dallas texas hi amy welcome to the ramsay show hi mr ramsay how are you better than i deserve what's up um i got two quick questions so first one is does it really matter if i invest in real estate or mutual funds because i'd really rather not be a landlord you do not have to invest in real estate okay so it's pretty much the same okay so then second question is um should i roll over my traditional 401k to a roth 401k basically i already asked my company if they would do it and they said no but should i push that or is that like probably something that they just don't offer uh they probably don't have a choice but no you should not do it unless you're on baby step seven and have extra money i am on baby step seven for you and i have i can [Music] yes sir okay so your tax bill is three hundred thousand dollars yeah i don't know if i i could probably piecemeal that you know each year so basically a little more i'm 32 net worth of around two million maybe step seven was paid for obviously baby step seven yeah i would roll it i would roll it to a roth and i'd certainly not put anything in the roth in anything in any traditional going forward your company offers a roth but they will not they're not offering the option for you to roll your traditional portion into the roth portion correct and i would yeah i mean i think you can purchase questions that's that's technically allowable and i'm not positive that they technically can deny you doing that okay once they offer once they offer a roth if they don't offer a raw 401k then they could obviously say well we don't have that available but if they've got it available to do see i've got a roth here let me give you an example how i know that okay i've got a roth here at the company at my company and the matching portion has to be traditional but i every year roll the matching portion after the match is given to me into the roth portion and i pay the taxes on it right i heard that so i was like huh interesting idea yeah so you can do that if you want to do that now uh your company his company both if they both have roth ir roth 401ks available i i'm not i can't tell you for sure that they have to uh we know technically they can because they it's available to you um and i'm not sure they technically by regulation can deny you doing that i think they just don't want to screw with it so walk me through the math on that dave so if i've got 700 grand and i and traditionally i roll it to a roth i got to pay taxes on that you got to pay taxes so that's going to cut it in half it's going to you're not going to take the money out you're going gonna take 300k from somewhere else and pay the taxes okay and then that 700k is going to grow tax free from now on so mathematically it's as if you put another 300 into your traditional because you're going to pay taxes on it if you had put the 300 you paid in taxes into this one right it would have grown enough the 700 now a million would have grown to enough to pay the taxes on the traditional okay so it has the same mathematical effect as an additional three hundred thousand being invested into your uh into your 401 because you're paying the taxes on the side wow you don't do that stuff till you get to baby step seven though okay because you need that other money if you when you use that 300k if you had mortgage you wouldn't use that 300k if you had other debt okay yeah so you're a baby step 7 though and she's 2 million our net worth at 32 years old dink ding another baby steps millionaire they're everywhere

Channel: Ramsey Everyday Millionaires

Views: 84,219

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Id: co-zRq55fH4

Length: 3min 56sec (236 seconds)

Published: Fri Feb 18 2022