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Can the money be rolled over to an IRA that I can start contributing to?

I had a 401K with an old employer and took money out and paid the taxes on it. I am still getting reports from Fidelity. Evidently I still have money in the acct. and is still being invested. Certainly the old employer is not having to match anymore because I don't contribute and not allowed.

Jan 26, 2013 by Kim from Lady Lake, FL in  |  Flag
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5 votes
Peter C. Karp Level 20

Kim,

Generally you want to keep pretax dollars (those in your 401(k)) separate from after tax IRA contributions. For accounting purposes it can be tricky to segregate the assets in an IRA if there are pretax- retirement plan contributions and after tax IRA contributions. Individual Retirement Rollover Accounts (IRRAs) are IRAs, which are designed to provide clients with a vehicle to postpone tax payments on distributions received from employer-sponsored-like retirement accounts. They used to be referred to as "holding tanks" or "conduit IRAs" because they maintain the tax-deferred status of assets so that they can be re-deposited into another like retirement plan in the future. You may make contributions to the IRA on a yearly basis given the contribution maximums for the calendar year. For 2013 the maximum IRA contribution is $5,500 and if you are 50 years of age or older you may contribute an additional $1,000 as a catch-up contribution.

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Comment   |  Flag   |  Jan 31, 2013 from San Francisco, CA

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4 votes
Herbert N Glass Level 18

To answer your main question hat is: "Can the money be rolled over to an IRA that I can start contributing to?" Please allow me to clarify your question first, so that you will know if I am understanding the question you want answered. I believe your question is, "can you have one IRA account that you can both roll money over to, and, if you want, also be able to make annual individual IRA contributions to the same IRA account each year that you want to (assuming that you are elibible to make an individual contribution to an IRA for such year)?" My answer to that question is an absolute "YES."

And with respect to your comment regarding your old employer, you are correct that if the employer is making matching contributions, the matching contributions would only go to those participants that were currently making elective deferral contributions out of their paychecks and that they met whatever other criteria the employer has set forth and communicated to the participants.

I wish you much good fortune.

Herbie Glass, Certified Pension Consultant

Comment   |  Flag   |  Jan 26, 2013 from Franklin, MI

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Jason Hull Level 20

Hi, Kim. Herbie's spot on. The actual rollover process is pretty simple. You can ask the brokerage that holds your IRA to do a rollover for you. You'll want to make sure that they execute a trustee-to-trustee transfer so that you do not receive the funds and potentially trigger taxes and penalties. They should have the forms which you'll need to fill out in order to make this happen. Check your brokerage's website or give them a call for details.

Comment   |  Flag   |  Jan 27, 2013 from Fort Worth, TX

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2 votes

You should absolutely consider rolling the balance of your money into an IRA. If you rollover your 401(k) to a ‘rollover’ IRA, you will likely have more freedom in selecting investment choices that may be better suited to your personal investment style. You could also have more control over fees.
If your balance is less than $5000, you employer has the option to force the distribution of your balance, which would be direct to you. If that happens, it would be subject to ordinary income tax, and if you are under 55, an additional 10% penalty

Comment   |  Flag   |  Jan 29, 2013 from Delray Beach, FL

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