Consolidating a small Rollover Trad. IRA with a Traditional IRA

Submitted by Jason Hochstadt on Tue, 2019-06-25 00:04

Hello,

1. If a client maintains a Traditional IRA worth $2,000 and a Rollover Traditional IRA worth $6,500, and no anticipation of increases in either, is there any reason not to combine the accounts from 2 to 1?

Since the IRA custodian charges a $25 fee/Acct., we’d like to save $25 and hopefully, over time, the Acct. will grow >$10k to avoid the fee.

2. Is there a certain dollar threshold where combining in #1 (assuming you confirm there is no reason not to do so) does not make sense given the added protections afforded Rollover IRAs which come from ERISA qualified plans?

Thank you.

Jason



Submitted by Alan - IRA critic on Tue, 2019-06-25 01:00

  • If client will be doing any back door Roths, taxes on the conversions can be eliminated if the IRA pre tax balance is rolled into an accepting employer plan. But some such plans will only accept rollover IRA incoming rollovers. If these accounts are combined, client will no longer have a rollover IRA since they will have been commingled. This may be something to consider.
  • Most states protect IRAs by state statutes, not through the federal BK Act. In most states therefore, there is no advantage in creditor protection from maintaining a rollover IRA. Even if client’s state does not provide such protection, these amounts are too small to matter. 

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