No, there is usually no penalty for converting a 401(k) to a Roth IRA, but you will need to pay income taxes on the amount converted. The conversion is treated as income, so you'll need to pay taxes on the portion of your 401(k) that was pre-tax.
Here are some other things to consider when converting a 401(k) to a Roth IRA:
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There is usually no transfer fee for rolling over a 401(k) to a Roth IRA, but the account fees for the new account may be higher than the old account.
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The deadline to convert is December 31 of the current year.
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If you convert a Roth 401(k) to a Roth IRA, you won't incur taxes because both accounts are after-tax. However, any employer match in a Roth 401(k) may be held in a traditional 401(k) and cannot be converted without incurring taxes.
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The amount converted from a traditional account to a Roth account is part of your modified adjusted gross income (MAGI). If your MAGI is above the threshold, you may be subject to a 3.8% net investment income tax.
