Roll Over of 401K money into an existing rollover IRA account

[meleana]

My husband is 70 and retired in 2020. He rolled over his lump sum pension into a traditional IRA account with our mutual fund company, but left his 401 K with his employer since it was in a stable value fund.

Upon speaking with our fee only financial advisor, we decided it best to move the 401k to a rollover IRA as well. We went on line and it seems we could easily transfer it to the same account he transferred the pension money into. But if we choose to set up a separate rollover account we would have to establish it with the mutual fund company first and then the employer has to have it on file for at least 10 days before we could roll over the money.

So my question is: Is there any reason not to co-mingle the pension rollover with the 401K rollover?

We hate to have to set up yet another accoun,t as he already has a standard Traditional, a Roth, and the Rollover, all containing various mutual funds, as well as a brokerage for the rollover.

 

[Sunset]

Just to understand, he put his lump sum pension with a mutual fund company, instead of a brokerage account where he could buy various funds/etfs/cd/ etc ?

 

[meleana]

Just to understand, he put his lump sum pension with a mutual fund company, instead of a brokerage account where he could buy various funds/etfs/cd/ etc ?

He has a rollover brokerage and retail account with a no load mutual fund company. All his pension money is in it - a retail target date fund for 2025 - and a Treasury Money Market as the sweep account. Also some other mutual funds from other companies in the brokerage account.

 

[Spock]

401K have a bit of shelter from civil lawsuits. Putting it into a Rollover IRA preserves some of those protections as one can trace the source to a 401k.

 

[audreyh1]

So my question is: Is there any reason not to co-mingle the pension rollover with the 401K rollover?

Yes, there is a good reason. 401K accounts have better protections against creditors and lawsuits than regular IRAs and an IRA rollover account retains those protections unless it is commingled with another IRA. My rollover account is labeled Rollover IRA as opposed to just IRA.

IRA vs. 401(k): Which One Is Better? | Bankrate

Is an IRA or 401(k) a better investment choice for you? Consider these factors to help you decide.

www.bankrate.com

 

[meleana]

401K have a bit of shelter from civil lawsuits. Putting it into a Rollover IRA preserves some of those protections as one can trace the source to a 401k.

But what I am asking is can we put the 401k money into the same roll over account we put the pension money into?

Or do we have to set up an entire new rollover account with the mutual fund company?

 

[meleana]

My thought is to just move it into the Treasury Money Market sweep account that is within the current rollover brokerage account. And later decide where we want to invest the money within that brokerage rollover account (where the pension money is also invested).

 

[Sunset]

My thought is to just move it into the Treasury Money Market sweep account that is within the current rollover brokerage account. And later decide where we want to invest the money within that brokerage rollover account (where the pension money is also invested).

I think that is the normal way, as the 401K is transferred as cash, they never transferred mine "in kind". It was done company 401K to the brokerage account directly, not by me touching the cash.

 

[Lorenzo]

I’m not sure I understand the question, but it’s common for people who leave multiple employers over the years to each time roll over a 401k from the employer being left into the same Rollover IRA.

 

[Car-Guy]

Yes, there is a good reason. 401K accounts have better protections against creditors and lawsuits than regular IRAs and an IRA rollover account retains those protections unless it is commingled with another IRA. My rollover account is labeled Rollover IRA as opposed to just IRA.

IRA vs. 401(k): Which One Is Better? | Bankrate

Is an IRA or 401(k) a better investment choice for you? Consider these factors to help you decide.

www.bankrate.com

Dang, and I thought I knew almost everything about IRA's/401k's/rollovers/etc. Still learning I guess. This is useful to me since I've been wanting to consolidate everything at Schwab anyway and this may be what I've been looking for.... Thanks.

Question? If I transfer my 401k money to a Rollover IRA, when I withdraw my RMD's for any year, can I withdraw my total RMD from just one of my IRA's (tTRA and rIRA) or must I figure/withdraw from each IRA account separately? (If anyone knows for sure)

 

[Luvtoride]

Yes, there is a good reason. 401K accounts have better protections against creditors and lawsuits than regular IRAs and an IRA rollover account retains those protections unless it is commingled with another IRA. My rollover account is labeled Rollover IRA as opposed to just IRA.

IRA vs. 401(k): Which One Is Better? | Bankrate

Is an IRA or 401(k) a better investment choice for you? Consider these factors to help you decide.

www.bankrate.com

Audrey, thanks for explaining that. I was wondering why my IRA account is labeled Rollover IRA (yes it was a new separate account with Vanguard, who was the sponsor of the 401k account I transferred it from).

 

[meleana]

I’m not sure I understand the question, but it’s common for people who leave multiple employers over the years to each time roll over a 401k from the employer being left into the same Rollover IRA.

Once again- let me reword it.

He has a rollover IRA account with his pension money in it. Should we establish a second rollover account (new account number) to put the 401K money into, or is it ok to just put the 401k money into the same rollover account the pension is in?

In other words, if we do that, the pension money will be co-mingled with the 401k money and my concern is maybe there is a reason I am not aware of that this should not be done this way.

 

[pjigar]

Check your state laws which may have equal asset protection for IRA viz-a-viz 401(k). But 401(k) is protected by federal law so if you move across state line then you don't have to worry about asset protection again. If you are happy with 401(k) fund choices and fees then stick with 401(k).

 

[audreyh1]

Once again- let me reword it.

He has a rollover IRA account with his pension money in it. Should we establish a second rollover account (new account number) to put the 401K money into, or is it ok to just put the 401k money into the same rollover account the pension is in?

In other words, if we do that, the pension money will be co-mingled with the 401k money and my concern is maybe there is a reason I am not aware of that this should not be done this way.

I think I answered your question of why not commingle money rolled over from a 401K in post #5.

 

[Sunset]

Once again- let me reword it.

He has a rollover IRA account with his pension money in it. Should we establish a second rollover account (new account number) to put the 401K money into, or is it ok to just put the 401k money into the same rollover account the pension is in?

In other words, if we do that, the pension money will be co-mingled with the 401k money and my concern is maybe there is a reason I am not aware of that this should not be done this way.

If you could find out the answer to lawsuit and bankruptcy protections for both the Pension and for the 401K, and they were similar, then mixing would be fine.
During a lawsuit, the money would if mixed have the lowest protection since it was mixed (IMHO).

So the safest thing is to not mix 401K money with Pension money, by opening another Rollover IRA.

In terms of RMD's , all the RMD withdrawal for a year can be taken from 1 account, (after adding up all the IRA accounts to figure out the total value and use that for the calculation).

 

[audreyh1]

Check your state laws which may have equal asset protection for IRA viz-a-viz 401(k). But 401(k) is protected by federal law so if you move across state line then you don't have to worry about asset protection again. If you are happy with 401(k) fund choices and fees then stick with 401(k).

You can rollover your 401K into an IRA and it will retain those federal protections as long as you don’t comingle it with other IRAs.

I’m not sure I understand the question, but it’s common for people who leave multiple employers over the years to each time roll over a 401k from the employer being left into the same Rollover IRA.

I suppose as long as every one of the rollovers was from a 401K this retains the protections.

 

[audreyh1]

Question? If I transfer my 401k money to a Rollover IRA, when I withdraw my RMD's for any year, can I withdraw my total RMD from just one of my IRA's (tTRA and rIRA) or must I figure/withdraw from each IRA account separately? (If anyone knows for sure)

You can withdraw funds from any of the IRAs.

 

[Car-Guy]

In terms of RMD's , all the RMD withdrawal for a year can be taken from 1 account, (after adding up all the IRA accounts to figure out the total value and use that for the calculation).

You can withdraw funds from any of the IRAs.

Thanks, good info. Another plus for getting rid of my 401k since "today" I need to make RMD withdrawals from my IRA and 401k separately.

 

[meleana]

I think I answered your question of why not commingle money rolled over from a 401K in post #5.

Thanks. So I guess we will have to call the mutual fund company and set up a new rollover account specifically for the 401k funds.

I knew it couldn’t be so easy… Lol!

 

[audreyh1]

Thanks. So I guess we will have to call the mutual fund company and set up a new rollover account specifically for the 401k funds.

I knew it couldn’t be so easy… Lol!

It’s always worth reviewing with your company what protections there are on your different rollovers.

 

[Sunset]

Thanks, good info. Another plus for getting rid of my 401k since "today" I need to make RMD withdrawals from my IRA and 401k separately.

Yes, annoying that the 401K and (all IRA's together) have to be treated separately.

 

[ncbill]

Yes, state law might provide additional creditor protection for IRAs.

Mine does, for any type of IRA, in any amount.

But rolling over the 401k to a separate IRA from any existing preserves federal creditor protection.

And since many of us relocate after retirement...

 

[38Chevy454]

Thanks, good info. Another plus for getting rid of my 401k since "today" I need to make RMD withdrawals from my IRA and 401k separately.

It might be wise to take two 2024 RMD withdrawals, one from each account before you do the rollover. Just to have definitive proof since they were separate accounts as of 12/31/2023. Then once the two accounts are combined in 2024, 2025 and beyond RMD can be a single withdrawal. Only since 401k has to have withdrawal even if you have IRA.

 

[Car-Guy]

It might be wise to take two 2024 RMD withdrawals, one from each account before you do the rollover. Just to have definitive proof since they were separate accounts as of 12/31/2023. Then once the two accounts are combined in 2024, 2025 and beyond RMD can be a single withdrawal. Only since 401k has to have withdrawal even if you have IRA.

Agree and I've already done that for 2024. Now I have to decide if I want to do a 401k rollover this year or "start the process" next year. I still have time. Decisions, decisions.

 

[Dash man]

Once again- let me reword it.

He has a rollover IRA account with his pension money in it. Should we establish a second rollover account (new account number) to put the 401K money into, or is it ok to just put the 401k money into the same rollover account the pension is in?

In other words, if we do that, the pension money will be co-mingled with the 401k money and my concern is maybe there is a reason I am not aware of that this should not be done this way.

Yes, you can rollover your 401k funds into an tIRA funded with only pension funds. Both the pension and the 401k are protected under ERISA laws. As long as the funds are not commingled with regular IRA contributions or any non ERISA protected funds, you are safe.