I Rolled Two Former Employers 401k Plans Into A Rollover Ira About 2 Years Ago. I Want To Roll It Into My New?
company’s 401k plan, but my broker says this cannot be done. They are calling what I have a ROLLOVER IRA and telling me those cannot be rolled over into 401k plans. Can anyone tell me if this is accurate info?
You CAN roll a rollover IRA into your new employer’s 401k plan under certain very specific conditions.
1. The new employer’s 401k plan must specifically allow it.
2. Your IRA must contain ONLY former 401k monies, and not ANY money that you yourself have contributed. If they have ever been mixed at any time, that is called “tainted” money and you cannot roll into the 401k.
3. If you do decide to roll the IRA into the 401k, DO NOT TAKE POSSESSION of the money yourself. Have the custodian (the brokerage) send the money to the 401k plan. This is called a custodian to custodian transfer.
“If you elect to open an IRA, keep the money separate or mix it only with other 401(k) or company-sponsored retirement fund money. That way, if you ever decide that you want to roll it back into a company-sponsored retirement plan, you have the option. Once you mix it with money that you’ve set aside apart from any employer plan, the money is considered tainted and can’t be reinvested in a company plan.”
4. Depending on what’s in your IRA, the broker might have to sell some or all of the assets before transferring them. Are they invested in things you want to keep? If so, it might be good to keep the IRA.
It is usually advantageous to keep the money in the IRA because your investment choices are greater. The downside is that, unlike a 401k, you can’t borrow money from your IRA. But you shouldn’t be doing that anyway, you should be leaving the money to grow for your retirement.
I don’t know if it’s legal or not, but it wouldn’t be something that makes sense to do. While money is in a company related 401K you are limited to the investment options that that program offers.
In personal IRA plans you can control your investment choices there are typically more investment choices. You can move it to another IRA plan, anytime you want. And also, more IRA plans offer more investment choices.
The only way you could have done this was if you had left the money in the old 401Ks. A 401K can be rolled to another 401K (if the new plan allows it) or an IRA.
What you want to do is roll the IRA to a 401K. See IRS pub 590, page 23. A 401K is *not* on the list of targets for rollovers. The list is TSPs, 457 and 403s.
Why would you want to do that? With an IRA, you have much greater freedom of choice for investments and custodians. You’re better off with an IRA.
Only your employer’s 401k plan administrator can answer your question.
Your broker has an incentive to keep your money under his control.
I agree with jlf. Anything that you can invest in your new 401k, can be invested in through your IRA. There is no point to roll it over.