Laid Off- Want to Roll over to Self direct IRA or Roth. Which is BETTER?

[Guest cliff47]

I am 56 y/o. Can roll over into a Roth IRA? Is it wiser than an IRA. Layed off a year ago. Working on a contractor basis now. Retirement horizon is 60. Recommendations?

[dh003i]

Off hand, I'd say a Roth. However, alot of it depends on your tax-situation, how much money you have to roll over, and how far off your time-horizon is. The longer you plan to leave your money there, the better a Roth is compared to a Traditional. To avoid a possibly enormous tax-burden, you may want to roll over to a Traditional, then slowly convert portions of it to a Roth. Depending on your debt-sitution, you should also consider protection from creditors. Roth IRA's aren't protected from creditor's in all States, so you should find out if they are in your State, if you are in a bad debt situation. If you want more specific advice, you should post a summary of your financial situation, including the amount of money, if debt-liability is a consideration, your time-horizon, and your tax-bracket.

PS: Your time-horizon isn't just from now till retirement, since you aren't going to just withdraw all of your money once you hit 60. Presumeably, you will keep most of it invested, taking out what you need on a yearly basis and leaving the rest to grow.

[Mary Kay Foss]

You can only convert to a Roth IRA from a traditional IRA so be sure that the initial rollover is from a qualified plan to a Roth.

While working as an independent contractor you may be able to make additional retirement contributions. Look at SEP, traditional IRA and Roth for this purpose.