Multiple rollovers into one account?

[jasg]

I have 3 tax advantaged retirement accounts. A pre-tax 401k, a traditional IRA with some post-tax contributions and an ancient 403b.

The 403b has some stellar fund options with very low fees (Vanguard Institutional Class index funds).

I am thinking of combining all three into the 403b.

Any hidden gotchas I should be aware of before I do this?

TIA

 

[kaneohe]

You might want to the 403B folks to see if they will accept the pre-tax IRA and 401K plans first. Often plans may accept outside funds if you are still an active employee but may not if you are not still employed there. Not sure what the rules are about post-tax IRA contributions............usually folks isolate by rolling the pre-tax stuff to a corporate plan and then do a Roth conversion
of the post-tax IRA.

I could imagine ,if communication is not good, that you roll all the IRA funds into the other plan and then when it is withdrawn, all of it might be reported as pre-tax so you could pay tax 2x on part of it.

 

[clifp]

I'd be surprised if the 403b total fees were actually all that low. They generally have account fees and admin fees that you wouldn't have with just rolling everything into self directed IRAs. All that info should be reveal this last April.

Second the state tax treatment of 401K is all over the map. For instance in Hawaii and several other states there is no state income tax on employer pensions. This includes employer contribution and earning on 401K. IIRC there is state where employee contributions are not taxed when withdrawn but employer contributions are.

I'd be especially leary about commingling your IRA especially a pre tax with a 401K. Once funds are co-mingled you generally get the worse possible tax treatment.

Check with your CPA if you have one, in not you might want to ask a question on Fairmark.com lots of smart taxes guys there.

 

[jasg]

Thanks for the tips.

I was surprised, but the 403b will accept rollovers. It is actually a new account I just opened as a "retirement savings account" alongside a traditional TIAA retirement plan.

The IRA actually predates Roth and contains an early 80’s IRA combined with a 401k from the same era. Both were originally pre-tax dollars, but I foolishly also contributed some post tax dollars after combining them. So, I already have a bit of a co-mingled mess for a third of my tax advantaged retirement money - and have to file Form 8606 paperwork each year.

 

[kaneohe]

I'm a bit confused .....in the OP, the 403B is described as ancient and later it is called
new. In any case, you might want to run this by Alan S. at the fairmark.com forums in the retirement subforum.

 

[jasg]

Sorry about Ancient and New.

I have an ancient (1975) TIAA "Basic Retirement Plan" and have just opened a new TIAA "Retirement Savings Plan" (403b) that I can use for new contributions / rollovers.

My current plan is to use TIRA non-deductible basis to fund a conversion to Roth IRA, then roll rest of TIRA to 403b. At end of year, 8606 will show TIRA balance of zero, 403b will have pre-tax and Roth post-tax. No taxes due and no pro-rated conversion or withdrawal of basis.

 

[Animorph]

Sorry about Ancient and New.

I have an ancient (1975) TIAA "Basic Retirement Plan" and have just opened a new TIAA "Retirement Savings Plan" (403b) that I can use for new contributions / rollovers.

My current plan is to use TIRA non-deductible basis to fund a conversion to Roth IRA, then roll rest of TIRA to 403b. At end of year, 8606 will show TIRA balance of zero, 403b will have pre-tax and Roth post-tax. No taxes due and no pro-rated conversion or withdrawal of basis.

Careful, you can't choose what gets converted to a Roth IRA. The percentage taxed will be the previously untaxed portion in all similar tIRA's divided by the total value of all similar tIRA's. No choice on that.

 

[kaneohe]

Careful, you can't choose what gets converted to a Roth IRA. The percentage taxed will be the previously untaxed portion in all similar tIRA's divided by the total value of all similar tIRA's. No choice on that.

Might be time for OP to get a professional opinion from Alan S. at the fairmark.com site (retirement subforum). I know that you can isolate IRA basis by moving pre-tax funds to 401K/403b first (which only accept pre-tax funds) and then convert the leftover which contains the basis to a Roth.
Because there can be some difficulty if the value of the TIRA varies significantly, I believe I have seen Alan S. say (but cannot find at this time) that you could accomplish the same thing by doing the process in the reverse order.......do the Roth conversion first and then the rollover to 401K/403b .....with the same final tax result. The latter process provides certainty to the conversion.......convert X $$ where X is the known and fixed basis.....
whereas doing in the opposite order introduces uncertainty since the leftover is the difference of a varying TIRA valuation and a fixed amount to rollover. I'm guessing that both steps may have to be done within the same year to show intent (in contrast to doing the process the "normal" way)

 

[Animorph]

Might be time for OP to get a professional opinion from Alan S. at the fairmark.com site (retirement subforum). I know that you can isolate IRA basis by moving pre-tax funds to 401K/403b first (which only accept pre-tax funds) and then convert the leftover which contains the basis to a Roth.
Because there can be some difficulty if the value of the TIRA varies significantly, I believe I have seen Alan S. say (but cannot find at this time) that you could accomplish the same thing by doing the process in the reverse order.......do the Roth conversion first and then the rollover to 401K/403b .....with the same final tax result. The latter process provides certainty to the conversion.......convert X $$ where X is the known and fixed basis.....
whereas doing in the opposite order introduces uncertainty since the leftover is the difference of a varying TIRA valuation and a fixed amount to rollover.

That would be nice if it can be done.

 

[jasg]

Might be time for OP to get a professional opinion from Alan S. at the fairmark.com site (retirement subforum). I know that you can isolate IRA basis by moving pre-tax funds to 401K/403b first (which only accept pre-tax funds) and then convert the leftover which contains the basis to a Roth.
Because there can be some difficulty if the value of the TIRA varies significantly, I believe I have seen Alan S. say (but cannot find at this time) that you could accomplish the same thing by doing the process in the reverse order.......do the Roth conversion first and then the rollover to 401K/403b .....with the same final tax result. The latter process provides certainty to the conversion.......convert X $$ where X is the known and fixed basis.....
whereas doing in the opposite order introduces uncertainty since the leftover is the difference of a varying TIRA valuation and a fixed amount to rollover. I'm guessing that both steps may have to be done within the same year to show intent (in contrast to doing the process the "normal" way)

That would be nice if it can be done.

Thanks for the Fairmark tip. I found the answer on my second search there. It appears that it is possible - either way.

Fairmark Forum :: Retirement Savings and Benefits :: Moving IRA assets into a 401k