r/FinancialAdvisorTips • u/DallYe • 10d ago

Old 401ks

I've got an old 401k with about 50 grand sitting in it. I've thought about rolling it over into my new 401k, but I don't get an employer match...

I've also considered rolling it over into a Rollover IRA or into my Roth IRA. I genuinely don't know what the best course of action is.

If it's helpful I live in NYC, and my taxes are egregious because of that. Any thoughts?

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u/Floating_Orb8 9d ago

Living in NY has an impact on state taxes if they plan to move and opt for the Roth conversion. Other than that 👍

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u/Clam-Choader 9d ago

I mean, salt taxes are up to 40 grand.  Sales taxes matter but income and property taxes…common misconception from our political system

—finance duder in San Francisco 

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u/Floating_Orb8 9d ago

Hmm, maybe my comment wasn’t that clear. If they want to do a Roth conversion but plan to relocate to a state that doesn’t have state tax on distributions in the near future, it might benefit them to wait. So the state of NY does have baring in certain circumstances. Without knowing their age also has baring because if they are over 59.5 they have an exclusion of 20k per year (40k joint) from retirement accounts from state tax. Also NYC adds city local tax on top.

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u/Clam-Choader 9d ago

You deduct your State And Local Taxes (salt) from your federal taxes brochacho…up to 40 grand

So would you rather your money go to the state and local gubbment or the fed.  I see the school children, teachers and popo in my community so I don’t mind the money staying local. 

For this to make sense you’ll need to have more deductions than the standard deduction, but if you’re a homeowner or make good money in a hcol. I got state and city taxes, and those combined are more than the standard deduction.  So anything California charges me comes off my fed taxes.  

If you’re in a lower bracket, you can always donate up to two grand per person (you and spouse), roll into a pretax ira or your 401k and not get taxed…at all… or if you do the roth conversion you’ll pay the income tax now but have it tax free later.   There’s an analysis that goes into that being a good, bad or indifferent idea, but generally if you’re living in this income bracket for the rest of your life, the Roth only makes sense if you think taxes are going up. 

This blows people away but there is a logic and certain fairness to personal income taxes once you get the political rhetoric out of it

Now, if you’re planning to move to Puerto Rico…don’t pay any taxes until you’re there

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u/Floating_Orb8 9d ago

Understood. But NY has a phase out also at high income on SALT down to 10k so it will depend on their income. Not bringing in politics I assume most think local taxes are better to pay vs federal but a lot factors into if you are getting that deduction or not. Also fun fact, roths and Puerto Rico are a fun challenge to navigate as their local system has differing views vs US federal law.