Q on merging retirement accounts

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KNMLHD
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Q on merging retirement accounts

Post by KNMLHD »

My wife has the following retirement accounts:

- IRA that was funded with pre-tax dollars @ Vanguard
- 403b Account with TIAA-CREF
- 401k Account from another employer

Seeing all three were funded with pre-tax dollars, I'm assuming there are minimal/no complications to merging the 403b and 401k into the IRA.. is that correct? Whenever we get to the point of pulling $ from either, they would all be taxed as income anyways.... right?

From an investment management perspective, smaller numbers of accounts would be simpler to manage, and the fund/etf/etc options at Vanguard are much better.

Are there any reasons not to do this? Any "gotchas" I'm not considering?
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Aptenodytes
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Re: Q on merging retirement accounts

Post by Aptenodytes »

You can almost definitely roll over the 401k to an IRA at Vanguard, if "another employer" signifies "former employer." Call Vanguard or read the info on the Web site to understand how. Don't make any mistakes in the procedures or you'll pay dearly (a reason to let Vanguard handle it all). If "another employer" is a current employer, then you can only move it to Vanguard if Vanguard is a custodian of your wife's current employer.

Likewise, if the 403-b is with a current employer, then you can only move it to Vanguard if Vanguard is a custodian of your wife's current employer.

If the 403-b is a former employer, you can roll it over but funds in the TIAA Traditional Annuity may be subject to the 10-year withdrawal requirement.

Assuming the most likely case is that the 401-k is a former employer, then I would count your blessings that you have both access to the TIAA offerings and the benefits of Vanguard via the rolled-over 401k and existing IRA. The TIAA mutual funds may not be as good as Vanguard's, but they are very good. And the TIAA Traditional Annuity is a very nice product for many people. When my employer went from being a TIAA monopoly to broadening the choices to include Vanguard, I initially thought I'd switch 100% to Vanguard. But as I looked into the details I realized that the Traditional Annuity was too good to pass up, under my circumstances, so I maintain 403-b accounts at both Vanguard and TIAA. The mutual funds are all at Vanguard and I have only the Traditional Annuity at TIAA.

Having accounts at two custodians is not a big deal to manage.
jebmke
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Re: Q on merging retirement accounts

Post by jebmke »

djdube525 wrote:
Are there any reasons not to do this? Any "gotchas" I'm not considering?
In most states there probably aren't any issues. In mine, Maryland, there is an exemption for some retirement income from state income tax. Distributions from qualified retirement accounts like 401(k)s can be eligible for this exemption but IRA distributions, even if the IRA is a rollover from a qualified retirement account, are not.
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dratkinson
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Re: Q on merging retirement accounts

Post by dratkinson »

Another gotcha. If you are still working and plan to make use of the "backdoor Roth" or "mega backdoor Roth" concepts, then the existence of any rollover traditional IRA causes a problem. Solution: roll rollover IRA into an existing employer's retirement plan---no rollover IRA, no problem. Search Wiki for "backdoor Roth".
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Topic Author
KNMLHD
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Re: Q on merging retirement accounts

Post by KNMLHD »

dratkinson wrote:Another gotcha. If you are still working and plan to make use of the "backdoor Roth" or "mega backdoor Roth" concepts, then the existence of any rollover traditional IRA causes a problem. Solution: roll rollover IRA into an existing employer's retirement plan---no rollover IRA, no problem. Search Wiki for "backdoor Roth".
She's not working at the moment, but sounds like before she does, I could merge everything into the TIRA (which we can tackle now), roll that back in, and then go the backdoor roth route. Correct?
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KNMLHD
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Re: Q on merging retirement accounts

Post by KNMLHD »

Aptenodytes wrote:You can almost definitely roll over the 401k to an IRA at Vanguard, if "another employer" signifies "former employer." Call Vanguard or read the info on the Web site to understand how. Don't make any mistakes in the procedures or you'll pay dearly (a reason to let Vanguard handle it all). If "another employer" is a current employer, then you can only move it to Vanguard if Vanguard is a custodian of your wife's current employer.
In this case, "Another employer" = former employer

Aptenodytes wrote: If the 403-b is a former employer, you can roll it over but funds in the TIAA Traditional Annuity may be subject to the 10-year withdrawal requirement.
The 403b was with a former employer (well over 10 years), and the investments that are in there are not in the TIAA Traditional Annuity.

Thanks for the insights/help!

-DD
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dratkinson
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Re: Q on merging retirement accounts

Post by dratkinson »

djdube525 wrote:
dratkinson wrote:Another gotcha. If you are still working and plan to make use of the "backdoor Roth" or "mega backdoor Roth" concepts, then the existence of any rollover traditional IRA causes a problem. Solution: roll rollover IRA into an existing employer's retirement plan---no rollover IRA, no problem. Search Wiki for "backdoor Roth".
She's not working at the moment, but sounds like before she does, I could merge everything into the TIRA (which we can tackle now), roll that back in, and then go the backdoor roth route. Correct?
In theory I believe this is correct. But there may be a problem in execution as this may be a "family issue" tax problem. Meaning the existence of her rollover tIRA may also cause problems should you want to contribute to a backdoor Roth. Read Wiki topic closely and wait for better-informed guidance from a senior investor.

The senior investors require better information to provide better advice. When one/both of you are working...
--What are your federal tax brackets?
--Do you make too much to contribute to a Roth IRA?


Bottom line. If you don't make enough to need the backdoor Roth concept, then this is a moot point. Only mentioned it because you requested potential gotchas.
d.r.a., not dr.a. | I'm a novice investor; you are forewarned.
Engineer250
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Re: Q on merging retirement accounts

Post by Engineer250 »

dratkinson wrote:Another gotcha. If you are still working and plan to make use of the "backdoor Roth" or "mega backdoor Roth" concepts, then the existence of any rollover traditional IRA causes a problem. Solution: roll rollover IRA into an existing employer's retirement plan---no rollover IRA, no problem. Search Wiki for "backdoor Roth".
Hopefully this isn't a hijack. I've read the wiki on this multiple times and still don't understand what you're trying to say. Is this an issue when one earns too much to do a normal Roth contribution? If one is trying to convert rollover IRA funds to Roth but is under the Roth income limits does it not matter anymore? Case I have in mind is similar to the OP, rollover funds not tIRA funds contributed same year (which could obviously just be recharacterized).
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icefr
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Re: Q on merging retirement accounts

Post by icefr »

dratkinson wrote:
djdube525 wrote:
dratkinson wrote:Another gotcha. If you are still working and plan to make use of the "backdoor Roth" or "mega backdoor Roth" concepts, then the existence of any rollover traditional IRA causes a problem. Solution: roll rollover IRA into an existing employer's retirement plan---no rollover IRA, no problem. Search Wiki for "backdoor Roth".
She's not working at the moment, but sounds like before she does, I could merge everything into the TIRA (which we can tackle now), roll that back in, and then go the backdoor roth route. Correct?
In theory I believe this is correct. But there may be a problem in execution as this may be a "family issue" tax problem. Meaning the existence of her rollover tIRA may also cause problems should you want to contribute to a backdoor Roth. Read Wiki topic closely and wait for better-informed guidance from a senior investor.
That is not correct. The I in IRA stands for Individual. Her Rollover IRA would prevent her from being able to do a Backdoor Roth IRA.
Income when married, however, is joint, so even if she's not working, his income is really joint income and would prevent her ability to do a Backdoor Roth IRA if said income was too high.


A separate note: some employers won't take roll-ins from a Rollover IRA IIRC - only from an old employer account.

Considering that she already has an IRA that was funded with pre-tax dollars at Vanguard, the questions about her future ability to do a Backdoor Roth IRA are moot - that ship has already sailed. I would just roll all of her old employer plans into a Rollover IRA at Vanguard and simplify. :happy
Penguin
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Re: Q on merging retirement accounts

Post by Penguin »

Are there any reasons not to do this? Any "gotchas" I'm not considering?
I believe that money in a 401K or 403B is protected from creditors and lawsuits. IRA money may not be protected depending on the state that you live in.
Jon
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dratkinson
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Re: Q on merging retirement accounts

Post by dratkinson »

This clarification/exchange by PM. Thought it worth mentioning.
dratkinson wrote:
anonymous wrote:
dratkinson wrote:Another gotcha. If you are still working and plan to make use of the "backdoor Roth" or "mega backdoor Roth" concepts, then the existence of any rollover traditional IRA causes a problem. Solution: roll rollover IRA into an existing employer's retirement plan---no rollover IRA, no problem. Search Wiki for "backdoor Roth".
The Mega Backdoor is not affected by existing IRAs because the rollover is directly to a Roth IRA (optionally sending the earnings to a TIRA) so no pro rata.
Thanks. I think I see your distinction:
Rollover tIRA + 401k-->rIRA, for the mega backdoor roth. (Rollover tIRA does not cause a problem.)
Rollover tIRA + tIRA-->rIRA, for backdoor roth. (Rollover tIRA does cause a problem.)
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Last edited by dratkinson on Wed Jul 13, 2016 12:37 pm, edited 1 time in total.
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flyingbison
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Re: Q on merging retirement accounts

Post by flyingbison »

Aptenodytes wrote: If the 403-b is a former employer, you can roll it over ...
Assuming the plan allows it. I have one 403b from a former employer that does not allow me to roll over any of the employer contributions to the account.
Topic Author
KNMLHD
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Re: Q on merging retirement accounts

Post by KNMLHD »

icefr wrote:Considering that she already has an IRA that was funded with pre-tax dollars at Vanguard, the questions about her future ability to do a Backdoor Roth IRA are moot - that ship has already sailed. I would just roll all of her old employer plans into a Rollover IRA at Vanguard and simplify. :happy
Ignorant questions on my part (I did briefly look at the wiki, but not catching the nuance)... why would that ship have already have sailed? Could I roll everything in and then convert?

I also happen to have a rollover IRA... can you not convert one at a time? Wishful thinking?
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