Retirement Savings and Benefits
Questions and comments about IRAs, 401k accounts, social security, and other forms of retirement savings and benefits.
401K --> IRA --> 401K
Posted by: StanQ, February 1, 2006 06:24PM
let's assume i left my job, transferred everything to Rollover IRA. Later I decide to participate in 401K again. is IRA --> 401K transfer possible so I can have money in one place?

Re: 401K --> IRA --> 401K
Posted by: Alan S., February 1, 2006 11:54PM
Yes, as far as IRS rules are concerned. But the acceptance of incoming IRA transfers is up to the plan, and all plans will not accept such incoming transfers. Some plans will only accept conduit IRA transfers, ie a rollover IRA like you have that has not been commingled with regular IRA contributions. A 401k plan cannot accept any after tax amounts with incoming transfers and they do not want to take any chances.

Given the wide choice of IRA investment and custodian options and broader beneficiary designation options, there is not much advantage of moving funds back to a 401k plan. Reasons to possibly do it:
1) Your state does not protect IRA accounts from creditors, and the ERISA protection of the 401k is broader than the Bankruptcy Act protection.
2) You have a chance to transfer pre tax IRA balance to a 401k, leaving the after tax basis in the IRA to convert to a Roth tax free.
3) Your enhanced 401k balance provides you with a larger loan potential if the plan allows recognition of the new balance.

Re: 401K --> IRA --> 401K
Posted by: DeeDee, February 2, 2006 12:15AM
Alan,

Wouldn't another benefit be the ability to take the funds out before age 59 1/2 so long as the IRA/401K owner retires?

Re: 401K --> IRA --> 401K
Posted by: Alan S., February 2, 2006 01:39AM
Yes, in the year turning 55 or later. Good catch.



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