Question regarding roll-over of 401(k) and pension into IRA

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nwa-non
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Question regarding roll-over of 401(k) and pension into IRA

Post by nwa-non » Mon Aug 20, 2018 6:22 am

I got a very specific question. I will lay out the situation below and then ask the question.

At my old job, I had a pension component and a 401(k). I have initiated a direct rollover of the pension account into a rollover IRA account at Vanguard.

My question is this: Can I rollover the 401(k) into the same rollover IRA account at Vanguard (that I opened for the pension) or would I need to open a separate account?

Note: I'm not asking for opinions on whether I should be moving these over to Vanguard or leave them as-is.

Jack FFR1846
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Re: Question regarding roll-over of 401(k) and pension into IRA

Post by Jack FFR1846 » Mon Aug 20, 2018 7:05 am

You can roll the 401k into the same account.

I've done this many, many times.
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cherijoh
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Re: Question regarding roll-over of 401(k) and pension into IRA

Post by cherijoh » Mon Aug 20, 2018 7:22 am

nwa-non wrote:
Mon Aug 20, 2018 6:22 am
I got a very specific question. I will lay out the situation below and then ask the question.

At my old job, I had a pension component and a 401(k). I have initiated a direct rollover of the pension account into a rollover IRA account at Vanguard.

My question is this: Can I rollover the 401(k) into the same rollover IRA account at Vanguard (that I opened for the pension) or would I need to open a separate account?

Note: I'm not asking for opinions on whether I should be moving these over to Vanguard or leave them as-is.
Is there any chance that you will want to roll your 401k back into your current or future employer's plan? Employers are not required to permit this, but when they do, I believe they can put restrictions on the transfer and may require that it be a "clean" rollover of 401k funds. If you think there is a chance of a future rollover, I'd keep them separate just in case. But if you've retired and there is no chance of a future rollover, then sure go ahead and roll them into the same account for convenience sake.

Outafter20
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Re: Question regarding roll-over of 401(k) and pension into IRA

Post by Outafter20 » Mon Aug 20, 2018 7:31 am

nwa-non wrote:
Mon Aug 20, 2018 6:22 am
I got a very specific question. I will lay out the situation below and then ask the question.

At my old job, I had a pension component and a 401(k). I have initiated a direct rollover of the pension account into a rollover IRA account at Vanguard.

My question is this: Can I rollover the 401(k) into the same rollover IRA account at Vanguard (that I opened for the pension) or would I need to open a separate account?

Note: I'm not asking for opinions on whether I should be moving these over to Vanguard or leave them as-is.
In regards to the pension component, what section of the IRS code is it governed by (i.e 414(h), etc)?

nwa-non
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Re: Question regarding roll-over of 401(k) and pension into IRA

Post by nwa-non » Mon Aug 20, 2018 10:03 am

cherijoh wrote:
Mon Aug 20, 2018 7:22 am

Is there any chance that you will want to roll your 401k back into your current or future employer's plan? Employers are not required to permit this, but when they do, I believe they can put restrictions on the transfer and may require that it be a "clean" rollover of 401k funds. If you think there is a chance of a future rollover, I'd keep them separate just in case. But if you've retired and there is no chance of a future rollover, then sure go ahead and roll them into the same account for convenience sake.
I wouldn't want to roll back in my future employer's plan. I'm not retired yet but I'm (almost) certain that I wouldn't move the funds from Vanguard. My question was to do more with the fact if there are any legal/tax implications of combining funds from pension and 401(k). Both are tax deferred accounts which will be taxed upon withdrawal, right ..?

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Earl Lemongrab
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Re: Question regarding roll-over of 401(k) and pension into IRA

Post by Earl Lemongrab » Mon Aug 20, 2018 1:15 pm

The main reason people want to roll an IRA into a 401(k) or similar is to allow the use of backdoor Roth when their MAGI gets too high for the regular contributions. If you think that might be case in the future, then be aware of the potential problem.

Depending on state, the 401(k) might provide greater protection against judgments.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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JoMoney
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Re: Question regarding roll-over of 401(k) and pension into IRA

Post by JoMoney » Mon Aug 20, 2018 1:38 pm

nwa-non wrote:
Mon Aug 20, 2018 10:03 am
... My question was to do more with the fact if there are any legal/tax implications of combining funds from pension and 401(k). Both are tax deferred accounts which will be taxed upon withdrawal, right ..?
Maybe, but probably not. When you commingle the funds it might prevent you from rolling those funds back in to another 401k. In some states, 401ks and pensions may have special tax advantages in their distribution that isn't given to an IRA. A qualified 401k and pension may have special exemption treatment in the event of a judgement. When you roll it into an IRA state laws may not provide the exemption outside of bankruptcy, and limits may apply. In the event of a bankruptcy if the funds in the IRA are traceable back to a qualified 401k it may offer more protection, but if it's commingled with other funds in the same IRA it gets less clear.
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informal guide
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Re: Question regarding roll-over of 401(k) and pension into IRA

Post by informal guide » Mon Aug 20, 2018 2:18 pm

Earl Lemongrab wrote:
Mon Aug 20, 2018 1:15 pm
The main reason people want to roll an IRA into a 401(k) or similar is to allow the use of backdoor Roth when their MAGI gets too high for the regular contributions. If you think that might be case in the future, then be aware of the potential problem.

Depending on state, the 401(k) might provide greater protection against judgments.
I had different reasons for rolling my 401k into an IRA. First, about 25% of my balances were Roth contributions. Within a few years, I will have to begin taking required distributions (RMD) and if the Roth funds remained in a 401k, I believe one has to include them in the required distribution calculations, Now that the 401 k is rolled over to IRAs (a Regular and a Roth), I will only have to do the distribution calculation and distribution from the regular IRA. Second, my plan sponsor "simplified" the investment offerings. The new lineup did not meet my needs, so I would have had some of my funds mapped to different investments (e.g., the high yield bond was eliminated - -I have around 12% of my fixed income allocation in this category (I know some BH do not believe that is appropriate))

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Earl Lemongrab
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Re: Question regarding roll-over of 401(k) and pension into IRA

Post by Earl Lemongrab » Mon Aug 20, 2018 2:28 pm

Of course, Roth IRAs don't interfere with backdoor Roth.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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