401k rollover to IRA

[Willers]

Our division of Megacorp was sold to another company on 12/31/13 so my 401k is available to be rolled over to an IRA. The options in the 401k are poor so I don;t plan to keep it within the existing 401k.

The process will be simple since the rollover will occur within Vanguard, but I was asked if I'd like to roll it to a separate rollover IRA account or into my existing Traditional IRA.

All else being equal, I plan to roll it to the t-IRA so I wouldn't add yet another account. Are there any disadvantages to that plan that I'm not considering?

Thanks!

 

[Alan]

I can't think of any financial disadvantages in merging the 2 accounts. When DW and I each did rollovers of 401k's we weren't asked and they went into separate IRA's. Just another account to track.

 

[scrabbler1]

The only disadvnatage I can see is that you may exceed SIPC coverage limits in the (unlikely?) event your IRA administrator goes bankrupt. Having 2 separate accounts *may* enable you to double your limits of protection within the rules of the SIPC.

Here is a link to a quick description of the SIPC:

SIPC Insurance Compared to FDIC Insurance | Generation X Finance

 

[H2ODude]

I have a traditional IRA I started in ~1978. It has since absorbed two 457 plans and three 401k's. I like to keep it simple. DW and I each have a tIRA and Roth; her T is modest and I'm anxious to use current 15% tax bracket to move it all into her Roth; one less account.

 

[Alan]

I have a traditional IRA I started in ~1978. It has since absorbed two 457 plans and three 401k's. I like to keep it simple. DW and I each have a tIRA and Roth; her T is modest and I'm anxious to use current 15% tax bracket to move it all into her Roth; one less account.

We've done similar. Over the last 4 years we have moved my tIRA and DW's tIRA to ROTH's so we now each only have 2 accounts in our IRA's, a Rollover and a ROTH.

 

[ERhoosier]

There are some special consideration of IRA Rollover to 401k. For example you can take loan from 401k & withdrawals at 55 (vs 59 1/2 in IRA).

8 Points To Consider Before Rolling Over A 401(k) To An IRA - Forbes

Personally, I rolled over into my IRA.

 

[Willers]

Thanks everyone. I appreciate the information and experiences.

 

[youbet]

Our division of Megacorp was sold to another company on 12/31/13 so my 401k is available to be rolled over to an IRA. The options in the 401k are poor so I don;t plan to keep it within the existing 401k.

The process will be simple since the rollover will occur within Vanguard, but I was asked if I'd like to roll it to a separate rollover IRA account or into my existing Traditional IRA.

All else being equal, I plan to roll it to the t-IRA so I wouldn't add yet another account. Are there any disadvantages to that plan that I'm not considering?

Thanks!

It shouldn't matter. Just be sure you do your 8606, especially if either the IRA or 401k has any post tax (non-deductible) money.

 

[Willers]

Yeah, stuck with 8606's 'till the end of time.

 

[Alan]

Yeah, stuck with 8606's 'till the end of time.

+1

My Rollover has a 1.9% basis so each ROTH conversion reduces that non-taxable sum by a very small amount. (When I first started for my US employer they had an after-tax retirement savings plan which they then converted to a 401k within a year of me signing up. At least that basis came over correctly to the IRA when I rolled it over.)

 

[scrabbler1]

When I did a rollover from my 401k to my TIRA in 2008, it had some after-tax contributions in it. What I did, however, was to take the principal amount (my actual after-tax contributions) in cash, a non-taxable event, and did a rollover of the rest (pretax contributions, their company matching dollars, and all earnings) into the TIRA. It was about 6% of the IRA's total amount so most of the IRA's value remained intact in the rollover. I do not know if I was allowed to do this because it was a rule unique to the plan I was in or was there a federal law which allowed this, though.