Reverse Rollover Uncertainty

[armor99]

Hello everyone,
This is a follow up post to a previous one that I did recently, about getting recently laid off. However, this is so crucial for a lot of people I would think. So I thought I would post it here. Maybe learn something I was not aware of before.

So for my retirement assets, I have a fairly large IRA (like 800k). For me to be able to retire at 55 (at the earliest), I would like to be able to reverse roll over my IRA, back into a company 401k, so I can use the rule of 55, and avoid that 10% penalty. Here is where things seem to become a bit of a dice roll. From the research I have done, looks like around 70% of retirement plans allow you to do that. However, there seems to be no rhyme or reason to it. Some companies allow for it, and others just don't. And there does not apparently seem to be a way to find out, until you accept the job offer. Since I am for a very limited time still ACTIVE on my current retirement plan, I thought I would call my current one up, and see what I could find out. Apparently their policy is not to discuss their retirement plans, unless you are ACTIVE with them (accepted the job position). I suppose I could just ASK the HR department as part of my acceptance of the job offer (when one comes my way), but that also "tips my hand a bit" that I am not going to be around for the next decade. (might just be my paranoia about it).

I figure that even with a 6% return over the next 4 years, I should be able to get over the 2mil mark for retirement assets (more assets than just the Roth IRA). And that should be just fine for me. It is truly a strange place to be financially. My actual salary at this point is almost irrelevant, because of the short time duration to retirement, but choosing what my (hopefully last) company for it's reverse roll over policy DOES matter. Is there a way I can find out before accepting the position? Am I being too paranoid about not wanting to ask HR for that information directly? And are there other things that maybe I am not thinking of. Thanks for taking a look, and helping me to think about it....

Just so it helps (currently):
~800k (IRA)
~765k(Roth IRA) with (270k personal contributions)
130k cash (glad I have this now that I am laid off)

Total (minus cash) = 1.6 million (X 6% average should be over 2 million in 4 years)

 

[SecondCor521]

I wouldn't say paranoid, but I think you're worrying too much about it.

It is completely normal and fair and typical for someone with an offer to ask benefits related questions. All you need to ask is if they'll let you do an IRA->plan rollover. All that implies is that you want to move your IRA into their plan; it doesn't "tip your hand" that you intend to retire at 55.

If you wanted to be a bit more nerdy, you could ask for a copy of the SPD (Summary Plan Document) where that information is spelled out. This way you might also get to see their policy on distributions from their plan once you reach 55 - which is something that also varies by company and probably impacts your plan more than the reverse rollover you're wondering about. Some plans only allow a 100% distribution after age 55, which probably doesn't work for your FIRE plan.

Also, my experience with HR is that their goal is to answer your questions and make sure the company doesn't get sued. They really aren't going to "rat you out" back to the hiring manager just because they suspect you might retire on them some day.

When I was getting close to FIRE, I was asking a lot of "hypothetically, how would it work if an employee - not me, mind you - were to do X?" of my HR person. Eventually I figured she didn't care and wouldn't rat me out, so I just told her my plans and she helped me with the very specific final execution details. She never betrayed my confidence in that regard. I bet you'll find similarly, especially if it's a large company.

 

[cathy63]

Asking if a 401(k) plan accepts rollovers from IRAs is very unlikely to make an HR person think you are planning to retire at 55. Those two dots just aren't going to connect in most people's brains; and there are other reasons why you might want to consolidate your retirement accounts. In fact, if asked, you can even say "I would just like to keep all my tax deferred savings in one account", which is basically true.

When you find a new employer, you should definitely ask to see the plan docs when you get to the offer stage and read them yourself. If you ask the benefits person, you might get a "yes, sure our plan does rollovers with IRAs" because they know that employees have rolled over their 401(k)s to IRAs. Making sure the person you ask actually understands the question could be the biggest hurdle, so having the docs to do your own verification is crucial.

SecondCor521's point about verifying that the plan allows partial distributions and Rule of 55 distributions is also very good. These are optional features just like accepting rollovers from IRAs, so a plan could have one feature and not have the other two, and you really want one with all three features.

Also, if any of that money is still in your current employer's 401(k), you should leave it there for now. It's sometimes easier to roll from one 401(k) to another than from an IRA to a 401(k).

 

[armor99]

Thanks so much for the wisdom and advice. Most of my friends would literally have no idea what I am even talking about. Probably correct. Being a bit too paranoid about it. Oh and I currently have a ROTH 401k with technically works with the rule of 55, but is against the entire purpose of a ROTH, would have to pay taxes on a portion of it. Much better idea to roll that over into my Roth IRA.

 

[eyenitnoy]

Hello everyone,
This is a follow up post to a previous one that I did recently, about getting recently laid off. However, this is so crucial for a lot of people I would think. So I thought I would post it here. Maybe learn something I was not aware of before.

So for my retirement assets, I have a fairly large IRA (like 800k). For me to be able to retire at 55 (at the earliest), I would like to be able to reverse roll over my IRA, back into a company 401k, so I can use the rule of 55, and avoid that 10% penalty. Here is where things seem to become a bit of a dice roll. From the research I have done, looks like around 70% of retirement plans allow you to do that. However, there seems to be no rhyme or reason to it. Some companies allow for it, and others just don't. And there does not apparently seem to be a way to find out, until you accept the job offer. Since I am for a very limited time still ACTIVE on my current retirement plan, I thought I would call my current one up, and see what I could find out. Apparently their policy is not to discuss their retirement plans, unless you are ACTIVE with them (accepted the job position). I suppose I could just ASK the HR department as part of my acceptance of the job offer (when one comes my way), but that also "tips my hand a bit" that I am not going to be around for the next decade. (might just be my paranoia about it).

I figure that even with a 6% return over the next 4 years, I should be able to get over the 2mil mark for retirement assets (more assets than just the Roth IRA). And that should be just fine for me. It is truly a strange place to be financially. My actual salary at this point is almost irrelevant, because of the short time duration to retirement, but choosing what my (hopefully last) company for it's reverse roll over policy DOES matter. Is there a way I can find out before accepting the position? Am I being too paranoid about not wanting to ask HR for that information directly? And are there other things that maybe I am not thinking of. Thanks for taking a look, and helping me to think about it....

Just so it helps (currently):
~800k (IRA)
~765k(Roth IRA) with (270k personal contributions)
130k cash (glad I have this now that I am laid off)

Total (minus cash) = 1.6 million (X 6% average should be over 2 million in 4 years)

I think you need a different plan.

However, I will first answer your question. Don't bother bringing this question to HR. There is a good chance the HR person isn't going to know the answer. In fact, there is a good chance if you ask the HR person isn't going to know other critical details, like the fees charges by not only the funds into which your money is invested but other fees, like charges by the managing company and 12b-1 and other fees. Ask them the company match-they'll know that-and take the match for the free money and pick the least stinky and fee laden fund they allow you to invest in.

To learn the actual answer to your question and other critical information, you'll need the fund documents and they may not be easy to get. If you can get your hands on them, you will see that keeping your money in your own IRA is much, much better than rolling it into the company plan. And when you do retire from the company, take that 401K money out and roll it into your current IRA.

My Advice: Don't send your IRA money into a 401(k). You are much, much better keeping it in your own account under your own control. The company plan, if you can ever get the documents, will stink. They will have poor investment options saddled with high fees.

Make a new plan to retire at 55. The current plan, using the rule of 55, is flawed.

 

[Theophrastus Bombastus]

Don't complicate life unnecessarily!

Look into 72(t) IRA rules for distribution. Between that and your available cash, it could likely solve your problem.