Transfer T401k funds to R-IRA
Years ago as a sole proprieter I had set up a 401k profit sharing plan as the only member. Later I incorporated and had set up a 401k Roth in addition. I have kept income under the IRS threshold this year with the intent of transferring my T401k funds to my Roth401k. I just found out I need a Roth IRA instead of a R401k as the IRS does not allow the R401k to get the transfer. I am also setting up a new Roth for my wife to transfer IRA funds to. Taxes this year are of no concern.
My intent is for my wife and myself to each have a Roth IRA account. My investments will all be mortgage notes and real estate.
Q: Does the new R- IRA have any restrictions that the R401k does not have?
Q: Is there any reason I would NOT want to cancel my R401k and just have the new R-IRA? (all funds transferred to it)
Q: Are there different max contribution limits on the R-IRA than the R401k?
Permalink Submitted by Alan Spross on Sat, 2008-12-06 20:42
1) No. The tax rules on distributions are somewhat different, but the Roth IRA rules are more tax friendly than the Roth 401k. A Roth 401k also has RMD requirements if the funds are left there until age 70.5.
2) No. The main benefit of the Roth 401k is that there are no income limits for regular contributions, while the Roth IRA will continue to have income limits to make regular contributions. To transfer to the Roth IRA, the 100,000 income limit is still in place until 2010, although it was a legislative error for the limit to apply. This is supposed to be corrected in a technical corrections bill.
3) Yes. See att’d link:
401k – see first and third lines
Roth IRA – see ninth and 10th lines.
Permalink Submitted by Alan Spross on Sat, 2008-12-06 20:42
Forgot the link:
http://benefitsattorney.com/modules.php?name=415
Permalink Submitted by Ron Carter on Sat, 2008-12-06 21:23
Thanks for the quick and precise answers. With that information I can feel comfortable in completing the paperwork to do my set ups and transfers on Monday.