rollover of 401k to new ira or existing ira
When I left my employer, I rolled over my 401k to a traditional IRA. Some years later, I learned from my employer that, as the result of the settlement of a class-action suit against them, I was awarded a new 401k (what I lovingly call my “baby” 401k). I now want to roll it over to a traditional IRA. The financial institution told me:
1) the money in the 401k is pre-taxed money; and 2) I had to take my 2011 RMD before the account could be rolled over. This sounds correct to me.
Question:
Can I roll the 401k over into an existing IRA, either one at the same financial institution or the roll-over IRA at another institution without any co-mingling problems? Both those IRAs were funded with pre-tax contributions.
Thank you.
Permalink Submitted by Alan Spross on Tue, 2011-02-01 19:56
Yes, you can roll it into an existing IRA, less the RMD.
If you are in a state that does not protect IRAs well against creditors (eg CA), and if your IRA balance will ever exceed 1 million, do not combine it with IRAs that are not already rollover IRAs. Rollover IRAs are not subject to the 1 million limit were you ever in a position where you had to file BK. IRAs to which you made regular contributions are subject to that limit.
Before doing the rollover, you might check if there is any highly appreciated employer stock in the 401k, since this apparently dates back several years. If so, you might be better off taking a taxable distribution and paying the much lower LT cap gain rates when you sell the stock. The employer can tell you what your plan cost basis is per share.