Transfer a traditional IRA into 401K

Submitted by Michael Klonsky on Sun, 2013-10-13 17:09

What are the ramifications if one transfers a traditional IRA into a 401K?

Permalink Submitted by Alan - IRA critic on Sun, 2013-10-13 17:55

There are several:

Your investments will be different and the costs and expenses will be different, maybe higher or lower
There may be limits on when you can take distributions from the 401k of your rollover funds as long as you continue to work there. For example, you may have to wait until 59.5.
If you have IRA basis, transfers are considered to consist of the pre tax portion first and the basis CANNOT be transferred to the 401k. If you have remaining IRA basis, you can then convert it tax free to a Roth IRA.
There are different penalty exceptions on distributions for 401k plans vrs IRA accounts
THe 401k of your employer at your separation at 55 or later can distribute funds to you penalty free
If you are still working at 70.5 for the employer, the IRA money in the 401k will not be subject to RMDs until you retire.
401k has much better creditor protection in states that do not fully protect IRAs from creditors