Consolidating traditional IRAs

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jebmke
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Consolidating traditional IRAs

Post by jebmke »

My wife has two traditional IRAs on the legacy platform. One is titled "Traditional" and the other "Rollover." Not inherited and no basis. Each is invested in one mutual fund (same one in both).

She would like to consolidate these and then transition to the brokerage platform which can be done with a straightforward exchange. Is there any particular compelling reason to choose one or the other as the "survivor" with all the assets? Creditor protection is not an issue. The "Rollover" account is twice the size of the "Traditional" one but I don't see that as being a factor here.
When you discover that you are riding a dead horse, the best strategy is to dismount.
exodusNH
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Re: Consolidating traditional IRAs

Post by exodusNH »

jebmke wrote: Tue Jun 11, 2024 7:33 am My wife has two traditional IRAs on the legacy platform. One is titled "Traditional" and the other "Rollover." Not inherited and no basis. Each is invested in one mutual fund (same one in both).

She would like to consolidate these and then transition to the brokerage platform which can be done with a straightforward exchange. Is there any particular compelling reason to choose one or the other as the "survivor" with all the assets? Creditor protection is not an issue. The "Rollover" account is twice the size of the "Traditional" one but I don't see that as being a factor here.
The IRS doesn't have a classification for "rollover"; you can definitely merge them.

The only difficulty she might face is if she wants to roll them into an employer's 401k. Some plans will only take funds that came from another retirement plan.

If that's not a concern, then I'd merge them.
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jebmke
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Re: Consolidating traditional IRAs

Post by jebmke »

exodusNH wrote: Tue Jun 11, 2024 7:42 am
jebmke wrote: Tue Jun 11, 2024 7:33 am My wife has two traditional IRAs on the legacy platform. One is titled "Traditional" and the other "Rollover." Not inherited and no basis. Each is invested in one mutual fund (same one in both).

She would like to consolidate these and then transition to the brokerage platform which can be done with a straightforward exchange. Is there any particular compelling reason to choose one or the other as the "survivor" with all the assets? Creditor protection is not an issue. The "Rollover" account is twice the size of the "Traditional" one but I don't see that as being a factor here.
The IRS doesn't have a classification for "rollover"; you can definitely merge them.

The only difficulty she might face is if she wants to roll them into an employer's 401k. Some plans will only take funds that came from another retirement plan.

If that's not a concern, then I'd merge them.
that isn't an issue either. We are early 70s; never going back. I know I can merge them but is there any particular direction to transfer

Trad --> Rollover
Roll -- Trad

Perhaps the labels are just that -- labels -- and it doesn't matter.
When you discover that you are riding a dead horse, the best strategy is to dismount.
exodusNH
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Re: Consolidating traditional IRAs

Post by exodusNH »

jebmke wrote: Tue Jun 11, 2024 7:49 am
exodusNH wrote: Tue Jun 11, 2024 7:42 am
jebmke wrote: Tue Jun 11, 2024 7:33 am My wife has two traditional IRAs on the legacy platform. One is titled "Traditional" and the other "Rollover." Not inherited and no basis. Each is invested in one mutual fund (same one in both).

She would like to consolidate these and then transition to the brokerage platform which can be done with a straightforward exchange. Is there any particular compelling reason to choose one or the other as the "survivor" with all the assets? Creditor protection is not an issue. The "Rollover" account is twice the size of the "Traditional" one but I don't see that as being a factor here.
The IRS doesn't have a classification for "rollover"; you can definitely merge them.

The only difficulty she might face is if she wants to roll them into an employer's 401k. Some plans will only take funds that came from another retirement plan.

If that's not a concern, then I'd merge them.
that isn't an issue either. We are early 70s; never going back. I know I can merge them but is there any particular direction to transfer

Trad --> Rollover
Roll -- Trad

Perhaps the labels are just that -- labels -- and it doesn't matter.
They're just labels. Pick the one you like better!
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retired@50
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Re: Consolidating traditional IRAs

Post by retired@50 »

jebmke wrote: Tue Jun 11, 2024 7:49 am
exodusNH wrote: Tue Jun 11, 2024 7:42 am
jebmke wrote: Tue Jun 11, 2024 7:33 am My wife has two traditional IRAs on the legacy platform. One is titled "Traditional" and the other "Rollover." Not inherited and no basis. Each is invested in one mutual fund (same one in both).

She would like to consolidate these and then transition to the brokerage platform which can be done with a straightforward exchange. Is there any particular compelling reason to choose one or the other as the "survivor" with all the assets? Creditor protection is not an issue. The "Rollover" account is twice the size of the "Traditional" one but I don't see that as being a factor here.
The IRS doesn't have a classification for "rollover"; you can definitely merge them.

The only difficulty she might face is if she wants to roll them into an employer's 401k. Some plans will only take funds that came from another retirement plan.

If that's not a concern, then I'd merge them.
that isn't an issue either. We are early 70s; never going back. I know I can merge them but is there any particular direction to transfer

Trad --> Rollover
Roll -- Trad

Perhaps the labels are just that -- labels -- and it doesn't matter.
You're right that it doesn't matter due to the identical tax treatment, but if you find the "Traditional" label easier to understand, then transfer away from the "Rollover" title.

In other words, keep the title / label you prefer.

Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
billfromct
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Re: Consolidating traditional IRAs

Post by billfromct »

When I “rolled over” my 401k into my traditional IRA (which I had for 30-35 years) about 5 years ago, Vanguard changed the name to “Rollover IRA”. The “Rollover IRA” has both traditional IRA contributions & my old 401k tax deductible contributions.

I don’t know if that was/is Vanguard standard practice.

bill
chemocean
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Re: Consolidating traditional IRAs

Post by chemocean »

My understanding from reading other posts on this forum, rolling over funds from a qualified program (401K) into a rollover IRA preserves some of the protections that the funds originally had under ERISA, maybe only in some states. If you transfer the funds to a traditional IRA, you lose those ERISA protections. I understand that ERISA protections include spousal benefits and creditor protection, but there may be more. As another poster suggested, you may only be able to transfer rollover IRA accounts back into a 401K ERISA protected account.
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jeffyscott
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Re: Consolidating traditional IRAs

Post by jeffyscott »

I'm no expert on it, but when I asked another non-expert (but, perhaps, a person more knowledgeable about the issue) from Schwab told me that this idea that the ERISA protection would carry over would really just be up to a judge, that there's not a specific law or anything to point to. His suggestion was getting a larger umbrella limit, if asset protection was a concern.

Also the value of any added protection may vary by state, since many states provide similar protection to IRA accounts. I think CA is one large exception to that.

(We've commingled ours, but original rollover amounts were from 457 and 403b, which may not be under ERISA, anyway. So there was no such protection to carry over, based on some things that I have read. And our state is one with good protection of those IRA assets.)
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jebmke
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Re: Consolidating traditional IRAs

Post by jebmke »

jeffyscott wrote: Tue Jun 11, 2024 9:04 am I'm no expert on it, but when I asked another non-expert (but, perhaps, a person more knowledgeable about the issue) from Schwab told me that this idea that the ERISA protection would carry over would really just be up to a judge, that there's not a specific law or anything to point to. His suggestion was getting a larger umbrella limit, if asset protection was a concern.

Also the value of any added protection may vary by state, since many states provide similar protection to IRA accounts. I think CA is one large exception to that.

(We've commingled ours, but original rollover amounts were from 457 and 403b, which may not be under ERISA, anyway. So there was no such protection to carry over, based on some things that I have read. And our state is one with good protection of those IRA assets.)
That is somewhat consistent with what an attorney told me about LLCs in many situations; essentially, if you are at risk, the window dressing of an LLC isn't going to mean much -- they will come directly after you. I'm sure there are exceptions. Sounds like it just doesn't matter in my case. Creditor or ERISA protection isn't an issue here and she will never roll this back to a qualified plan.

Thanks all.
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Artsdoctor
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Re: Consolidating traditional IRAs

Post by Artsdoctor »

Given that your primary goal is simplification, I wouldn't choose one over the other since they each contain only one mutual fund.

I agree with simplifying as much as you can, by the way.
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jebmke
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Re: Consolidating traditional IRAs

Post by jebmke »

Artsdoctor wrote: Tue Jun 11, 2024 9:10 am Given that your primary goal is simplification, I wouldn't choose one over the other since they each contain only one mutual fund.

I agree with simplifying as much as you can, by the way.
Thanks; a slight digression. She also has one very small inherited IRA on the legacy platform. If she can do a QCD from this IRA I'm inclined to recommend we do that and get this one taken off the books. It is a real nit and while the auto-RMD works fine with legacy, I don't know if it works with brokerage. Am I correct that QCDs can be made from an inherited IRA?
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retired@50
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Re: Consolidating traditional IRAs

Post by retired@50 »

jebmke wrote: Tue Jun 11, 2024 10:05 am ... Am I correct that QCDs can be made from an inherited IRA?
I think this is allowed, assuming you're old enough to do a QCD in the first place.

viewtopic.php?t=377367

Regards,
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Re: Consolidating traditional IRAs

Post by BolderBoy »

jebmke wrote: Tue Jun 11, 2024 10:05 am... while the auto-RMD works fine with legacy, I don't know if it works with brokerage.
Works fine with brokerage, too. I transitioned last July and auto-RMDed in December.
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jebmke
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Re: Consolidating traditional IRAs

Post by jebmke »

BolderBoy wrote: Tue Jun 11, 2024 10:24 am
jebmke wrote: Tue Jun 11, 2024 10:05 am... while the auto-RMD works fine with legacy, I don't know if it works with brokerage.
Works fine with brokerage, too. I transitioned last July and auto-RMDed in December.
so they will continue to calculate and distribute?
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Geologist
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Re: Consolidating traditional IRAs

Post by Geologist »

Vanguard will calculate RMD's in the brokerage. If you want to automate the distribution of RMD's, you will have to set it up once you have made the transition (automated processes don't continue across platforms because, after all, they are legally distinct platforms).
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jebmke
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Re: Consolidating traditional IRAs

Post by jebmke »

Geologist wrote: Tue Jun 11, 2024 10:37 am Vanguard will calculate RMD's in the brokerage. If you want to automate the distribution of RMD's, you will have to set it up once you have made the transition (automated processes don't continue across platforms because, after all, they are legally distinct platforms).
understand. Can easily have our rep do that. He is pretty good on follow up.
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Artsdoctor
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Re: Consolidating traditional IRAs

Post by Artsdoctor »

jebmke wrote: Tue Jun 11, 2024 10:05 am
Artsdoctor wrote: Tue Jun 11, 2024 9:10 am Given that your primary goal is simplification, I wouldn't choose one over the other since they each contain only one mutual fund.

I agree with simplifying as much as you can, by the way.
Thanks; a slight digression. She also has one very small inherited IRA on the legacy platform. If she can do a QCD from this IRA I'm inclined to recommend we do that and get this one taken off the books. It is a real nit and while the auto-RMD works fine with legacy, I don't know if it works with brokerage. Am I correct that QCDs can be made from an inherited IRA?
You can absolutely arrange for QCDs from an inherited IRA (provided you're over 70-1/2). It's a great way to wind down the account.
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