I have a couple of 401k accounts from previous employers. I have one with my current employer. I am wanting to move them to IRA mostly for better investment choices.
I have lots of questions.
What kind of IRA does this result in? I am assuming traditional
Do I need a separate IRA for rolling over each 401k? If not, would there be different consequences of merging them versus having separate?
Are there any immediate (this year, next year etc) tax consequences?
I am about 45 years old. What are the long term tax consequences or differences?
Do IRAs allow individual stocks? Is the answer dependent on the brokerage?
I have a family? Is there some nomination feature I should look/ask for while doing the rollover.
If I desire to do a self directed IRA later, can these rolled over IRA(s) be turned into a self directed IRA?
Would the IRAs be in my name or can they be made joint with my wife?
When can I transfer an 401k to IRA for a employer I am no longer working for? I am assuming anytime after I have stopped working (this is the least important question for me)
I have a Roth IRA and my wife also has one. Does that have any impact.
Any book or publication suggestions? I have actually managed to read some IRS publications. Sometimes seen one refer to the other and then the other refers back :)
I think you should be able to do this. I'm not certain to what extent particular 401k plan details affect this, but I don't believe that a plan can prevent a former employee from doing a rollover. Each plan might have its own procedures and rules though.
One important item is that you will want to do a direct rollover to your IRA custodian rather than taking the money yourself and depositing it in the IRA. The reason is that if you don't roll it over directly to the new custodian, the company will be required to withhold 20% of the distribution for federal taxes. You would then need to make up that 20% from other funds in order to roll the entire amount over. [If you did make up the money, you would get the withheld taxes back when you file your return, but you would have to come up with the extra money in the meantime. Better to just do it directly and avoid this issue entirely.]
Yes. Unless you have the uncommon situation of having a Roth 401k. These have only been available for a short time, so it is unlikely. And judging from your other questions, it seems like you would know this if it were true.
You would not need a separate IRA. At one time, there were special rollover IRAs, but they are no longer necessary.
What I'm not clear on is how the single IRA might affect a desire to roll the money into a new employer's 401k plan. However, it doesn't seem likely that you want to do that.
Other than potential withholding taxes if you don't transfer the money directly to the IRA, there are no immediate tax consequences. You may need to report the transaction, but it won't affect the taxes you pay. In future years you would get the tax deferred growth of the investment. But that would be the same as the 401k.
I don't think there would be any differences in the tax consequences between a 401k and a traditional IRA. They both grow tax deferred and all of the income drawn from them is ordinary income when you get it.
There are some differences with regard to things like hardship withdrawals, using money for a first time home purchase, etc. But you really should avoid doing those things.
Some do. It depends on who you choose for the IRA custodian and which type of account you set up with them. It is not hard to find a custodian that allows individual stock ownership. I would think any brokerage would support that. Some banks might not.
I'm not sure what you mean by nomination feature. Perhaps you mean beneficiary designation? That is a a standard part of the application. You are probably constrained by law to designate your spouse as the primary beneficiary barring an explicit disclaimer from that spouse.
There are some timing rules (such as 1 per calendar? year) that affect your ability to roll over IRAs, but other than that you can pretty freely change them. Most brokerages can easily change the type of account if that is something you are interested in.
You might want to consider exactly what you mean by a "self directed IRA". In the broadest sense, just about any brokerage IRA is self- directed in that you choose which funds or stocks to invest in. The standard IRAs work like this, but generally have some limitations as to investments, limiting them to standard securities. There are other, narrower sense self-directed IRAs that allow a wider range of investments including things like real estate holdings. I would expect those IRAs to have higher fees, though.
The "I" in IRA stands for Individual. There are no joint IRAs.
NO. However, I would set up an IRA just for the rollovers separate from any IRA that has received contributions. A "rollover IRA" that is funded completely from 401(k) funds can subsequently be rolled back to a 401(k) while a contributary [traditional] IRA cannot.
If done properly, the rollovers are tax free, so there are no consequences.
Difference between what?
brokerage?
Depends on the trustee. Many stock brokerage firms permit this. Many banks do not.
A beneficiary form. However, that is connected to the account, NOT the rollover.
Depends on the trustee.
IRAs are always individual. That's what the "I" stands for.
Anytime.
Not on the rollover.
The choice of trustee is not a question we should answer here. Ask on "misc.invest.*" and/or "alt.invest.*". It depends on how you plan to self-direct the account(s).
My understanding is that the rule requiring rollovers from a 401(k) to stay segregated for potential return to another 401(k) is no longer. I can transfer all my pretax IRA account into my 401(k). I'm sure there's a specific citation for this somewhere.
EGTRRA 2001 added the rules that made portability easy. However, there was a sunset provision. PPA 2006 removed the 2010 sunset provision. Therefore, there is no requirement to segregate funds any more. Any amount withdrawn from an IRA can be rolled over to a qualified plan tax-free as long as you can find a plan willing to accept the rollover.
Yes, as others have said, anytime after your employment terminates. But make sure you are not leaving any employer matching contributions behind. In some plans the employer matching contributions may only be deposited in your account quarterly or annually. If you roll it over before they deposit the employer contribution, you might lose it.
Others have covered the topic adequately, but I would add one thing.
If possible, it would still be best to keep the money separate. You don't need a separate IRA for each former employer, but I would keep the money that was formerly in employer plans segregated from contributory IRA's. There could be circumstances in which you want to roll the money back into an employer plan. While the IRS will allow it, the plan may not. Consider the following, not unlikely, scenario:
Plan writes its rules in 2003 or 2000 or 1789. Plan's rules allow rolled in money from all the sources IRS allows at the time. IRS expands the scope of allowed sources of money. Plan does not bother to amend its plan for this.
You now have money you want to roll in, IRS will allow it, but the plan won't.
I have run into just this situation currently with a SEP-IRA. IRS will allow me to roll the money into an employer plan, but the employer plan doesn't allow it.
What are the possible reasons you could want to roll in the money?
a) You want to have no pre-tax IRA's so you can create new non- deductible IRA's and immediately convert to a Roth with no tax consequence b) You want to take a loan against your IRA money but can only do that in a 401(k) c) Employer plan offers better investment options. (For example, my employer has access to institutional mutual funds with expenses as low as 4-5 basis points.) d) Employer offers annuitization options on retirement that are better than what you can get on your own.
I don't understand the point you are trying to make in the instance case. What does it matter whether the taxpayer has 3 traditional IRA accounts (ABC Inc. 401K rollover IRA, DEF Inc. 401K Rollover IRA & Contributory IRA) or just one IRA that contains all the 401k rollovers and annual contributions? Either the new employer plan is going to allow IRA rollovers in or its not.
If the plan were written now, it probably would either allow them or not.
If the plan was written while 401K IRA rollovers were allowed but ordinary IRA rollovers weren't, it was probably written in accordance with the law then. There's no reason to believe the plan was amended since then to allow more rollovers; why would the employer pay to do that?
I imagine the question comes down to whether this is optional or not. If not, the new employer can't reject based on the wording of their plan. If they accept rollover transfers, they'd have to comply. EGTRRA eliminated the need for special designation and segregation, that should put closure on the issue for employers, shouldn't it?
Whether _what_ is optional or not? A plan doesn't have to allow any rollovers into it.
A plan is a legal document, which means exactly what it says. If it was written to allow only certain types of transfers and not amended, then it allows only those types of transfers.
A plan can accept rollovers or not. We agree. IRS (well, congress) passed law saying separate rollover IRA not needed any longer. If the company accepts IRA money, is it optional that they can respect the fact that designated "rollover" IRAs are not needed, or can they still require it come from one.
That may be. I am only asking here, then what is the point of the new law eliminating the need for that "rollover IRA"? I admit, I tried to read through EGTRRA, and it wasn't happening.
If the plan says "We accept money from rollover IRAs" then that's what it accepts. If it says "We accept money from whatever sources or conduits the law permits" then that's what it accepts. In the latter case, it accepts from all IRAs (now). In the former, it would have to be amended to accept from all.
The new law allows more funds to be rolled into a plan, if the plan also allows that. Some plans will automatically, others will be amended to.
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