Time to Rollover IRAs & 401ks Left Orphaned!
03.01.2012
Every year we find more and more investors taking a look at all of their investments and wishing they had far fewer accounts to deal with come tax time. There's no fault here, really. The average person works more than ten different jobs in their lifetimes, and along with that comes multiple retirement plans. Through the years the number of plans grows as the investor is too busy to watch each one individually, and worse yet, the investment strategy does not align with the investor's goals.
Fortunately, the IRS made some changes several years ago that greatly enhanced an investor's ability to consolidate their retirement assets. The chart below provides a helpful look at the rollover options available to investors today:
|
Roll To |
|||||||||
|---|---|---|---|---|---|---|---|---|---|
|
|
|
Roth IRA |
Traditional |
SIMPLE |
SEP IRA |
457(b) Plan |
Qualified Plan1 |
403(b) Plan |
Designated Roth Account (401(k), 403(b) or 457(b)2) |
|
|
Roth IRA |
Yes |
No |
No |
No |
No |
No |
No |
No |
|
|
Traditional IRA |
Yes3 |
Yes |
No |
Yes |
Yes4 |
Yes |
Yes |
No |
|
|
SIMPLE IRA |
Yes3, after 2 years |
Yes, after 2 years |
Yes |
Yes, after 2 years |
Yes4, after 2 years |
Yes, after 2 years |
Yes, after 2 years |
No |
|
|
SEP IRA |
Yes3 |
Yes |
No |
Yes |
Yes4 |
Yes |
Yes |
No |
|
|
457(b) Plan |
Yes3 |
Yes |
No |
Yes |
Yes |
Yes |
Yes |
Yes,3, 5 after 12/31/10 |
|
Roll From |
Qualified Plan1 |
Yes3 |
Yes |
No |
Yes |
Yes4 |
Yes |
Yes |
Yes,3, 5 after 9/27/10 |
|
|
403(b) Plan |
Yes3 |
Yes |
No |
Yes |
Yes4 |
Yes |
Yes |
Yes,3, 5 after 9/27/10 |
|
|
Designated Roth Account (401(k), 403(b) or 457(b)2) |
Yes |
No |
No |
No |
No |
No |
No |
Yes, if a direct trustee-to- trustee |
|
IRS Publication 590
1Qualified plans include, for example, profit-sharing, 401(k), money purchase, and defined benefit plans. |
|||||||||
Consolidation of your rollover IRA, 401(k), 403(b) and 457 plans is just the start. Once you have simplified the number of accounts, the next step is to put in place a strategy that fits your needs. This can be easier said than done, however. The only way to really get your hands around the answer to this question is to complete a financial plan, of course. We talk about the value of creating a financial plan over and over for good reason; far too many investors (and their financial planners) never take the time to dig into the details of their situation to fully understand what it's going to take to send junior to college, remodel the kitchen, or retire at a reasonable age.
As April 15th draws nearer, we encourage you take the time to get your retirement assets on track. Especially in today's volatile markets, investment success and your ability to attain all of your financial goals won't come from hope and luck, but rather, by you taking the initiative to put in place a sound strategy once and for all.
Mark S. Starosciak, Managing Partner & Financial Advisor
Infinium Investment Advisors
Opinions and views expressed by our Financial Advisors are provided for informational purposes only and should not be construed as investment or tax advice. Content on this website is not a recommendation to buy or sell any security or financial product, or investment strategy. The ideas expressed on this site are solely the opinions of the Financial Advisor(s) and do not necessarily represent the opinions of firms affiliated with the author(s). The author(s) may or may not have a position in any security referenced herein. Consult your investment and/or tax adviser before making any investment decisions for its appropriateness in your personal situation.
