Some readers might remember this post from early February where I talked about opening a Roth IRA. At that time I knew I was going to be moving and changing jobs mid-year, so I mentioned that later in the year I was going to rollover the two retirement plans associated with my previous employer into my Roth IRA. Now that I've settled down financially after my move, I've set the wheels in motion for the rollover.
I've opened a Rollover IRA with Scottrade (the brokerage I use for my other accounts) and I've initiated direct rollovers of the 403(b) plan held by TIAA-CREF and the 401(k) plan held by Vanguard. Once those institutions have verified some information, they will send checks to Scottrade that will be deposited in my Rollover IRA. I was told it would take about 1-2 weeks for that to happen. After the funds are deposited, I will then convert (or merge) my Rollover IRA into my existing Roth IRA. My hope is that the rollover and conversion will be completed by mid-November, at which point I will have a sizable chunk of money in my Roth IRA to reinvest.
The move of pre-tax money into my post-tax Roth IRA will result in the money being treated as taxable income for 2013. Even though I do not like taking a big tax hit, it is a one-time expense that makes financial sense. Using various online calculators, I determined that the taxes I pay now will be much smaller than the taxes I would likely pay on withdrawals from a traditional IRA in 30+ years. By converting to a Roth IRA, I can look forward to making tax-free withdrawals in the future from an account that will benefit from 30+ years of tax-free compounding. Besides, I have already set aside enough money to pay the estimated taxes on the rollover money, so it will not affect my current rate of new capital investment.
I will post another update once the rollover and conversion have been completed.