401k Rollover

A) what version of Q are you using? B) what's an RMD? C) are you moving securities, or just cash, or both?

db

Re: RMD - here is a link to a thread in another forum.

A simple way to do the rollover might be to just create a new brokerage account [tax-deferred], sell the 401k securities, and transfer the cash to the new account.

You could make the new account a QW Traditional IRA account but QW gets confused and wants to classify the transfer-in as a contribution - I have not been able to figure out what the implications of this is.

Word of caution - my comments apply to a 401k that is 100% pre-tax contributions [zero basis]. If the account includes after-tax contributions it gets more complicated. You might get some more info by searching the Google forum 'misc.taxes.moderated'.

That's exactly what I did.

Regards, Hank Arnold

JM wrote:

Slightly OT question: Can you move securities from a 401 to and IRA? I thought you had to cash out the holdings and then move the cash?

Q 2005 H&B (and presumably Premiere, upon which H&B is based) has a "Shares Transferred between Accounts" function ... and I believe that some earlier years have included this function also.

I inquired about moving securities because a 401k that I previously owned included a substantial quantity of the employer's NYSE-traded stock ... and the the 401K issued the stock certificate, per my request, when I left the company. So, I DID have to transfer both cash and stock. Granted, not ALL securities are transferrable -- but SOME are. Also, if your 401k trustee is, for example, Fidelity, and you hold Fidelity mutual funds in the account you might (haven't actually tried) be able to transfer shares to a Fidelity IRA. Same for some other fund companies.

Oh, in response to my earlier post in this thread ... I do know what a "Required Minimum Distribution" is ... I just had a senior moment and didn't recognize the abbreviation.

db

I knew you could do that within a single investment company (the Fidelity example you gave). I just didn't realize you could transfer stock from one company to another. I figured there would be ownership issues (assuming the stock is in street name), cost-basis questions, etc. So if you buy stock X at price Y in a 401k from, say Fidelity, and, after leaving your job, you transfer stock X to an IRA at, say, Schwab, your cost basis is still the original Y ? Whether X's price has gone up or down in the intervening years?

And the transfer you discussed from your own personal experience: The transfer was done with no withholding, no penalty, etc? Did you have to pay anything for the stock certificate?

DP, You're making this WAY more complicated than is necessary.

With my former employer, I bought company stock in my 401K. I also bought into various funds that were specific to the 401k. I tracked the cost basis, and the current value, of both stocks and funds in Quicken.

When I left the company, the 401k administrator sold the funds and send me a check, payable to Fidelity Trust Company for benefit of (my rollover IRA). They ALSO sent me a stock certificate with registration exactly the same.

I deposited BOTH into my rollover IRA. In Quicken, I recorded the cash transfer and a stock transfer. The cost basis/lots/etc. for the stock cert transferred perfectly.

There's no tax issues as I did it. Both the check and the stock cert were considered to be "Trustee to Trustee" transfers. NOTE that they were issued to Fidelity FBO my account ... NOT to me. Just because I had my hands of the check and the cert doesn't matter ... they were in Fidelity's name.

My former 401k didn't charge anything to issue the cert. Other plans have different rules.

db

Adding to danbrown's comments, cost basis is a non-issue here from a present or future tax perspective [if your account is 100% pre-tax contributions]. All funds will ultimately be taxed as ordinary income upon withdrawal regardless of origin - employee contributions, employer contributions, dividends, interest, gains/losses on sales, etc. Your cost basis in this account is effectively zero as far as the IRS is concerned.

I rolled a 401k a few years ago and the 401k included after-tax contributions. The FI issued two checks; one for the total after-tax contributions and one for everything else [including gains on the after-tax contributions]. The after-tax funds were a tax-free distribution and were deposited to a regular brokerage account. Everything else was deposited to the new tax-deferred account. At that time one could not roll after-tax contributions into an IRA but the tax laws have changed and I think you can now roll everything. In this case you do have a cost basis; the cumulative amount of the after-tax contributions.

Cost basis of securities in an IRA doesn't apply to tax handling, as you've pointed out. Agreed.

Cost basis of securities in an IRA DOES apply to portfolio analysis and management. Just because the eventual funds withdrawal are ordinary income doesn't preclude me from considering the performance of the investment.

db

Agree with you 100%!!

My comments were aimed strictly at the tax perspective. Occured to me to add a comment regarding performance tracking - didn't - should have! :