IRA Strategy During Unemployment

"What's the difference between traditional and Roth?" — And why it might matter now.

Traditional vs. Roth: The Basics

Rollover Maintains Character

• Traditional 401(k) → Traditional IRA (no tax event)
• Roth 401(k) → Roth IRA (no tax event)
• Traditional 401(k) → Roth IRA (taxable conversion)

The Roth Conversion Opportunity

If you're unemployed for part of the year, your income is lower than usual. This may be an opportunity for a Roth conversion:

2025 Tax Brackets (Single Filer):

Converting traditional IRA money to Roth in a low-income year means paying less tax on the conversion. The money then grows tax-free forever.

Should you do this? Consider:

• Do you have cash to pay the taxes? (Don't use IRA money)
• Will you be in a higher bracket when you retire?
• How long until you need the money?

Finding Lost 401(k)s

Have old 401(k)s from previous jobs? This is a good time to consolidate:

How to find them:

• Contact former employers' HR departments
• Check the National Registry of Unclaimed Retirement Benefits
• Use the DOL's abandoned plan search

Why consolidate:

• Easier to manage
• Better investment options in IRA
• Don't forget about accounts

Critical: Update Your Beneficiaries

Beneficiary designations override your will. If your ex-spouse is still listed as beneficiary, they get the money regardless of what your will says.

Review beneficiaries after:

• Divorce
• Marriage
• Birth of children
• Death of current beneficiary
• Any major life change

Check these accounts:

• 401(k)
• IRAs
• Life insurance
• Bank accounts with POD/TOD
• Pension plans