401K and Pension Rollover (early 2021)
Is there any reason to not combine a qualified pension plan rollover with a 401K rollover from the same company into the same (already established, zero cost basis) IRA for a client retiring in late 2020 and receiving the rollovers in early 2021?
Thanks and Happy Thanksgiving!
Permalink Submitted by Alan - IRA critic on Tue, 2020-11-24 21:22
Generally, no reason not to. However, if the already existing IRA has accepted regular IRA contributions or has accepted a rollover from other IRA accounts that had such contributions, the IRA is not technically a rollover IRA regardless of the new rollovers. This could effect the creditor protection for this IRA if the state of residence does not provide full creditor protection and uses the 2005 federal BK Act where rollover IRAs have unlimited dollar protection and contributary IRAs are limited to 1.283 million. This could also be a negative should client return to work and wants to roll the combined IRA into an accepting plan of the new employer. In most states, and if the client is retired for good, these concerns are immaterial.