Any reason to keep a contributory IRA separate from a rollover IRA
Client has both an IRA he has been contributing to and a rollover IRA from previous employers. Is there any reason to keep them separate, or could they be consolidated into one IRA?
Client has both an IRA he has been contributing to and a rollover IRA from previous employers. Is there any reason to keep them separate, or could they be consolidated into one IRA?
Permalink Submitted by Alan - IRA critic on Thu, 2021-07-08 16:53
For tax purposes on distributions, all IRA accounts are treated as one combined account. However, if client were to want to roll over their IRA into their employer plan in order to facilitate back door Roth conversions, some employer plans only accept rollover IRA accounts, not IRA accounts that have received regular contributions. In addition, in some states with poor IRA creditor protection, a rollover IRA will have better creditor protection, so if the two accounts were combined, there would no longer be a rollover IRA and therefore creditor protection could be limited. This is not an issue in most states. Client may not be affected by either of these two situations, and in that case there would be no reason not to combine them, preferably by direct transfer.