401(k) Rollover to IRA Eligibility
This is my first post and would appreciate any incite. I have a client who does not qualify to contribute to an IRA. However, he would like to rollover an employer sponsored retirement plan (he is 61 years old and still an employee) into an IRA.
My initial thoughts are that even though he doesn’t qualify to contribute, he can still rollover the funds. It is my understanding that he isn’t eligible to make NEW contributions, but rollovers are allowed.
Thank you for the answers.
Dan
Permalink Submitted by Alan Spross on Sun, 2008-11-30 03:27
Dan, welcome to the forum.
You are correct that he can rollover the funds. Options are as follows:
1) Current employer plan – since he is still working, the plan must permit rollovers, perhaps they do since he is over 59.5. If he wishes to roll over to a Roth IRA, his modified AGI must not exceed 100,000 and taxes will be due.
2) Former employer plan – can always do the rollover.
Direct rollover should be used to avoid withholding.
Note that if he is still working, he can always make a regular contribution to a traditional IRA, but if he is covered by a retirement plan at work, the contribution may not be deductible. Perhaps this is what you meant when you said he does not qualify. For a Roth contribuiton his income must also not exceed an income threshold based on his filing status.
You are correct that the qualifications for rollovers and regular contributions are quite different.
Permalink Submitted by Daniel Johnson on Sun, 2008-11-30 03:42
Thank you for the reply. That is in fact what I meant by him not being eligible. He currently has a 401(k) and an employer sponsored pension. He was under the impression that he wouldn’t be allowed to make the rollover so I wanted to double check that this would in fact be allowed.
Thanks again.