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Combining rollover IRAs?
Old 03-07-2016, 09:01 PM   #1
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Combining rollover IRAs?

I'm trying to figure out a strategy for cleaning up my various accounts (all at Vanguard), both for the sake of simplicity and because I think I might move about half of my assets to Fidelity or to Schwab as I become increasingly uneasy about having a considerable pile of eggs in one (lockable) basket.

Anyway, at Vanguard I have four rollover IRAs (one each from four employers, one of which was in California). I kept them separate as I rolled them from 403(b) or 401(k) accounts because long ago I was advised to do this in order to be able to identify the state in which the income was earned. I guess back in the 70s and 80s, California was notorious about going after income taxes on retirement assets earned in California, even if the retiree no longer lived in California.

Is there any longer merit to this? Or can I make my life simpler by combining the four IRAs into one? (or maybe into two, and moving one to Fidelity/Schwab).

Thanks.
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Old 03-07-2016, 09:12 PM   #2
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Found this. You can safely consolidate them.

Quote:
On January 10, 1996, President Clinton signed into law H.R. 394, now P.L. 104-95, which prohibits state taxation of certain pension income of nonresidents received after December 31, 1995. .....

.... was a response to the source tax levied by California and New York (and, to a lesser extent, certain other states) on the pension income of former residents now living in other low or no-tax states. A prime example would be a former California resident who retires to Nevada, and receives a pension from his California employer.
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Old 03-07-2016, 09:20 PM   #3
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Thanks! That's one step toward making my tangled portfolio simpler!
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Combining Rollover IRA's
Old 03-11-2016, 07:38 PM   #4
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Combining Rollover IRA's

GreyDog,

It is a good idea to merge the rollover IRA's, now that the need for separation by state and state taxation of ex-residents is off the table.

But, be sure that the only moneys you merge are all "pure" 401k/403b/457, or whatever other qualified ERISA savings, and no other moneys are co-mingled with them.
It is my understanding that these ERISA qualified retirement savings dollars are 100% protected from lawsuits and bankruptcy by virtue of their qualified source, whereas ordinary IRA contributions are protected only up to $1M
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Old 03-11-2016, 07:42 PM   #5
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Steevo, that protection varies by state. Some states protect IRAs the same as 401k/403b/457.

This link is a couple years old but indicative.

http://www.thetaxadviser.com/content...teirachart.pdf

or this list may be more current... hard to tell.

IRA Asset Protection | Self Directed IRA | IRA Creditor Protection | IRA Bankruptcy Protection | www.irafinancialgroup.com
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Old 03-11-2016, 07:54 PM   #6
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Good stuff, pb4uski.
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Old 03-11-2016, 07:57 PM   #7
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Right. It makes sense to combine IRAs to simplify.

That said, I may decide to park half at Fidelity and half at Vanguard. If I combine all into a single IRA at Vanguard (current location), do I later have the option to roll 50% of that single IRA to Fidelity? Or should I reduce the four IRAs to two in order to preserve the possibility of moving some to Fidelity?

As always, thanks for the help!
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