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Multiple accounts
Old 03-18-2006, 09:39 PM   #1
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Multiple accounts

I think I'm in a fairly common situation having multiple retirement
accounts of various kinds. I have a 401k with pre and after tax money with
one firm and a 403b, annuity, Roth IRA and Traditional IRAs with pre and after tax money with another firm.

When I take distibutions form these accounts I have to take proportionally from the after tax and pre tax amounts, so if 10% of my the money is after tax then 10% of my withdrawl must also be from the after tax bucket. I think I have to include qualified plans I have with both companies when I do this calculation, Is this correct?

To avoid this I'm considering rolling over my old 401k to the company I have my IRAs with, however, they cannot track the after tax contributions. Any suggestions for better handling all these different accounts?
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Re: Multiple accounts
Old 03-19-2006, 10:27 AM   #2
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Re: Multiple accounts

Nun,

Can't really help w/ concrete suggestions since I'm in the same boat but here are some random thoughts that might be helpful:
1) When you talk about taking distributions, I assume you are talking about RMDs after you turn 70.5 yrs old?? My impression is that for traditional IRAs(deductible/ nondeductible----or what you call pretax/aftertax), you have the choice to pick which IRAs the distribution comes from. I believe the IRS considers all your traditional IRAs as one big pool of money and, regardless of where you draw from, the proportion of taxable/nontaxable distributions is determined by some formula on form 8606 and is the same whether you draw from all taxable or all nontaxable IRAs---at least it is that way when you do a conversion from traditional to Roth.

2) For IRAs at least I believe that you can draw from whichever account you wish to satisfy the RMD. I think fund companies and brokers may remind you and even give you formulas about the impending RMD but it is still up to you (for IRAs) to give the orders.

3) In contrast to 2), my impression is that for qualified plans, you may not be in control of the RMDs and each company will compute and send out their RMD independent of all others.
If true, at least you won't have to bother w/ computation of these so having multiple qualifed plans might not be a big problem in this respect. You might want to check w/ your 401K and 403b plans to verify this.

4)There are some creditor protection aspects of rolling over qualified plans to IRAs that might be of interest. They are discussed in this very interesting (and very lengthy) article

http://www.fpanet.org/journal/articl...p0805-art6.cfm

You want to consider whether to leave the very strong protection of qualified plans for the somewhat less protected conduit IRA rollover which only contains rollovers from qualified plans. You want to consider whether to commingle these type of funds with traditional IRAs and lose the pedigree of the qualified plans (probably not the best thing to do right now)

4)Regarding the 401K rollover.....I just checked IRS Pub. 17 and it sounded like you could rollover to another qualified plan if they tracked the taxable/non-taxable portions or to an IRA (that sounds like you are the tracker if you go the IRA route just like in the traditional deductible/nondeductible IRA).

5) Sorry for this long and non-specific response which might be wrong in some or all parts (I'm learning too) but if I had to summarize:
a) Qualified plans might do RMDs calculations for you so not a problem to leave them unless you have other reasons

b) In principle, no reason to keep traditional deductible/ non-deductible IRAs separate. I still like to separate them anyway to more easily track their pedigree in case I forget to file an 8606 when making non-deductible contributions.

c) consider creditor protection issues when rolling qualified plans to IRAs.




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Re: Multiple accounts
Old 03-19-2006, 10:38 AM   #3
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Re: Multiple accounts

Thanks, I just posted some concrete numbers as I though my OP was a bit vague. I'm taking money out at age 60, so not waiting until I need to take min
distributions.
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