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kar_the_terrible · Nov 12, 2007, 09:04 PM

I'm on an H1-B and switched employers recently. The new employer has a 403b contribution plan and will not let me mix funds from my 401k. First of all, do I have to be a permanent resident or a US citizen in order to open an IRA account? (Single and under the 110k limit)

If I can in fact have an IRA, I'm allowed to remove funds from a Roth IRA after 5 years without penalties correct? What are the tax implications of moving my 401k funds to a Roth IRA if this is at all possible?

Is there such a thing as a Roth 401k with the same money withdrawal rules as the Roth IRA?

Thanks.

ebaines · Nov 26, 2007, 11:27 AM

I can't answer your question about rules for H1-B visa holders, but in general you can roll your old 401(k) plan only into a rollover IRA plan or another 401(k), but you can not roll it to a Roth 401(k). A rollover IRA is NOT the same as a Roth IRA, and you will eventually owe taxes when you make withdrawals. Remember, the contributions you made (and that your previous employer may have matched) were with pre-tax dollars, so the IRS hasn't had the opportunity to take its share. With a Roth IRA you use after-tax dollars, meaning you already paid tax on it. That's why you must always keep Roth IRA monies separate from both ordinary IRAs and roll-over IRAs.

There is indeed something called a Roth 401(k), but few employers are offering them yet. They have only come into being this year, so they will probably pick up in popularity over the next few years. As with a Roth IRA, if you had a Roth 401(k) you would fund it with after-tax dollars. Not sure about withdrawal rules, but I suspect that they are similar to traditional 401(k) rules (i.e. withdrawals only after age 59-1/2 without penalty, ability to take loans, etc). You should also be able to roll a Roth 401(k) into a Roth IRA.