On Wed, 14 Jan 2004 07:34:07 CST, "HW \"Skip\" Weldon"
<skip5700removethis[at]hotmail.com> wrote:


- quote -

I was wrong. Because of recent retirement plan changes, rolling a
traditional IRA to a 401k does not require separate internal
accounting. Further, the entire account would be treated thereafter
under 401k rules. And one significant result is that in some
instances participants could gain relief from the IRA premature
distribution penalty before age 59.5.

-HW "Skip" Weldon
Columbia, SC

On Sat, 10 Jan 2004 14:19:57 CST, paulmaf[at]aol.com (PaulMaf) wrote:


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Well, since we're not swearing to this <grin> , my understanding is
that while IRC places no hinderance on rollovers, neither does it
mandate that all plans accept rollovers from all other plans.

For example, the 401k for State employees here will not accept
rollovers from IRA because of the extra expense of internally
accounting for the different types of money - remember that IRA has a
59 1/2 premature distribution rule, while for 401k it may be age 55.
Further, you can borrow from a 401k but not an IRA. Rolling IRA to
401k or 403b does not change the original characteristics.

The IRC also does not mandate that there be no custodian-imposed
penalties - an unpleasant surprise when the investor is trying to roll
funds invested in B Share mutual funds and annuities.


-HW "Skip" Weldon
Columbia, SC

- quote -

waschanged.

To Quote the 2004 (for tax year 2003) J. K. Lasser, "Your Inomce Tax 2004",
page 156, sidebar:

If you roll over a distribution from an employer plan into a TRADITIONAL IRA (I
added the emphasis), you may later roll over a distribution from the IRA to a
new employer's plan. You May make the subsequent rollover from the IRA EVEN IF
THE FUNDS FROM THE FIRST EMPLOYER WERE MIXED WITH REGULAR IRA CONTRIBUTIONS AND
EARNINGS." (Again I added the emphasis)

For those born before 1936 and want to preserve averaging, it gets complicated.
But for everyone else, there is no problem.

What is not clear in the Lasser blurb is if you can roll the entire amount in
the mixed IRA account or only the rollover amount plus earnings. I would
suspect, from recollections of the explanantions I read at the time, it is the
entire amount.

In fact some stuff I read then also said there was no hinderance to rolling fom
any retirement account to any other type of retirement account at any time
following normal rules. But I won't swear to this last.

The biggest tax risk with leaving money in a 401k instead of moving it out
is the multigenerational benefit that a IRA gets versus the disgorgement
that a 401k would face and the possible large income tax hit that generates.

"Rich Carreiro" <rlcarr[at]animato.arlington.ma.us> wrote in message
news:uk73zokj9.fsf[at]animato.arlington.ma.us...
- quote -

"Stu Redman" <Stu.Redman[at]east.texas.com> writes:

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As I've said more than once -- aside from what's already
been detailed, 401(k)s and IRAs are taxed identically.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

"Rich Carreiro" <rlcarr[at]animato.arlington.ma.us> wrote in message
news:uoetboobn.fsf[at]animato.arlington.ma.us...
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Sometimes I wonder if some readers make my n's look like t's. =)

- quote -

Good summary. I'll add two points, one minor, one major.

Minor point: Newer plans are allowing brokerage windows or portals, so one
can invest in just about anything, if they don't mind paying some additional
fees.

Major point: One advantage that people rarely think of in advance, and why I
discourage commingling under any circumstance, is the ability to purchase
life insurance in a qualified plan. When one is young, and saving for
retirement, this might not be much of an issue.

But, if you're already retired, and you have accumulated a high net worth,
say $3,000,000 or more, and you want to pass on to your heirs the bulk of
your estate, you probably need some permanent life insurance. One of the
problems life insurance agents have in this market is "Finding the premium."
At older ages, life insurance costs more than it does when one is younger.

For example, a male age 35, who doesn't smoke cigarettes, can buy $100,000
of whole life for $1,197 per year. That seems expensive, compared to term,
but the whole life premium never goes up, and for estate liquidity purposes,
we need a permanent solution. At age 75, that same policy will have a
premium of $10,616 per year. At age 85, the premium is $22,179 per year (and
that's assuming one can even qualify at those ages -- ratings are not
uncommon, which makes the premium even higher). That's a little bit more
than the premium for the 35 year old. =)

Even people with a high net worth may find those premiums steep, especially
when they come out of income, or one must pay taxes on a distribution from
an IRA or QP to pay it.

Fortunately, there is an alternative -- using money in a qualified plan to
purchase a policy. Generally, one can use up to 50% of contributions to the
plan to purchase whole life (or 25% to purchase term and universal life),
but this doesn't help when one is already retired, and not making any
contributions. Using an often forgotten tax code, one may use upwards of
100% of "aged money" in the plan to purchase whole life insurance. Various
ownership transfer strategies, such as a sub-trust, can remove the "net
amount at risk" (that's the death benefit, less any cash surrender values,
or interpolated policy reserves) from the qualified plan, eliminating double
taxation of death benefits.

How does one accomplish this when they are retired and only have an IRA?
They set up a small business, and establish a Profit Sharing plan under IRC
Sec. 401, and then roll the IRA into the plan. There's some hoops one needs
to hop through, but nothing extraordinary or difficult. I'm just summarizing
here.

But what if you've commingled money? Then this strategy won't work for you,
at least not with the commingled money.

A lot of people don't know this, but one can buy life insurance inside a
403(b), as well. They can also purchase it inside a 457 deferred comp plan,
and a Keogh, or HR-10 plan.

Qualified plans are often the best source of premium dollars in these
situations, because of tax leverage. If you're going to have to pay an
expense, pay for it with the cheapest dollars (lowest tax). A dollar in the
bank is worth 50 cents at death, roughly. A dollar in a qualified plan (or
IRA) is worth 20-30 cents at death, because of double taxation at death.

I have some really neat software that illustrates how one can leverage
qualified plan / IRA assets where one has an estate liquidity problem. There
are some fantastic planning strategies one can employ, as long as they
haven't commingled IRA money along the way.

Brent D. Gardner, ChFC
Chartered Financial Consultant
http://members.cox.net/brentdgardner1378/

"Be ever questioning. Ignorance is not bliss. It is oblivion. You don't go
to heaven if you die dumb. Become better informed. Learn from other's
mistakes. You could not live long enough to make them all yourself." - Hyman
George Rickover (1900-86), Admiral, US Navy, advocated development of
nuclear subs & ships

The Chartered Life Underwriter (CLU) and Chartered Financial Consultant
(ChFC), designations owned and exclusively offered by The American College,
signify the highest standards of academic study and professional excellence
in the financial services industry.

"Rich Carreiro" <rlcarr[at]animato.arlington.ma.us> wrote in message
news:ufzeoa7rm.fsf[at]animato.arlington.ma.us...
- quote -

The OP's question was:

If so, what's the tax going to be on this mixed vehicle?

That is what my answer refers to. You are correct that he cannot roll
it into another employer's plan.

hvanclee[at]nyx.net (Henry van Cleef) writes:

- quote -

I'm not Brett, but...

If that account has only been funded with rollover (i.e. no annual
contributions have ever been put into that account), you retain the
ability to roll the monies in that account back into a 401(k), etc.
The primary tax advantage of that in some cases it can give you a way
to make arbitrary withdrawals at age 55 without penalty instead of
having to wait until age 59.5. But that's irrelevant to you, as
you're 67+.

The benefits of rolling an IRA back into a 401(k) are:
* Generally better creditor protection.
* Being able to take a loan against the money
(one can argue if this is really a benefit :-)
* Potential ability to make arbitrary withdrawals
as soon as age 55.
* Ability to play the Net Unrealize Appreciation game
with company stock in the account.

The costs of doing this are:
* Limited to what the plan allows you to invest in.
* May be unable to withdraw money without quitting
the company, even if there's an emergency.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

In article <5CnLb.9102$zf.936[at]okepread05> ,
Brent D. Gardner, ChFC <bgardner20[at]cox.net> wrote:
- quote -

just what possible tax benefits I might have forfeited when I rolled
my last 401K into a rollover IRA that had already been funded with a
lot of other rollovers. Note that I left this job at age 67.

Hank

"Stu Redman" <Stu.Redman[at]east.texas.com> writes:

- quote -

(1) Doesn't matter that all contributions were tax-deductible.
Brent is correct -- it's a commingled account now, and as
such will be ineligible to be rolled back into a
qualified employer plan (modulo what changes the past
couple of tax bills made -- still hoping to hear from one
of the tax geeks here about that).

(2) Even if the contributions were not tax-ded, it still doesn't
matter. All that will do will be to make a pro-rata portion
of a withdrawal tax-free. The remainder of the withdrawal
will be taxable (and penalizable if withdrawn early).
Of course, the *same* result would obtain if the non-ded
portions were placed in a separate IRA. Remember, for
determining taxability of withdrawals, you only have
one IRA (just look at Form 8606).

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

"Brent D. Gardner, ChFC" <bgardner20[at]cox.net> wrote in message
news:KFnLb.9104$zf.5587[at]okepread05...
- quote -

You're confused. Let me help you. The contributions were all
tax-deductible at the time he made them. Therefore, they were all treated
the same for tax purposes at the beginning, and will be at the end.

"Rich Carreiro" <rlcarr[at]animato.arlington.ma.us> wrote in message
news:m3lloigug2.fsf[at]animato.home.lan...
- quote -

Incorrect. There are no meaningless questions, just meaningless answers. I
answered the question. You didn't.

There are taxation differences, even today, and once you mix, you forfeit
any tax advantages, because the Service defaults to the lowest common
denominator on taxation (Read: Highest tax).

Brent D. Gardner, ChFC
Chartered Financial Consultant
http://members.cox.net/brentdgardner1378/

"Be ever questioning. Ignorance is not bliss. It is oblivion. You don't go
to heaven if you die dumb. Become better informed. Learn from other's
mistakes. You could not live long enough to make them all yourself." - Hyman
George Rickover (1900-86), Admiral, US Navy, advocated development of
nuclear subs & ships

The Chartered Life Underwriter (CLU) and Chartered Financial Consultant
(ChFC), designations owned and exclusively offered by The American College,
signify the highest standards of academic study and professional excellence
in the financial services industry.

"Stu Redman" <Stu.Redman[at]east.texas.com> wrote in message
news:H8nLb.74$le5.27733147[at]newssvr11.news.prodigy.com...
- quote -

You're confused. Let me help you.

OP quote:

"So I have rolled over 401k funds from a previous employer into this IRA. I
have also made personal contributions to the IRA during the times when I was
not in a 401k plan but still wanted to be saving. And I plan to roll over
future 401k funds when I leave future jobs. Thus, my Rollover IRA is
"mixed.""

Rollover + Contributions = Mixed = Commingled.

Any questions?

Brent D. Gardner, ChFC
Chartered Financial Consultant
http://members.cox.net/brentdgardner1378/

"Be ever questioning. Ignorance is not bliss. It is oblivion. You don't go
to heaven if you die dumb. Become better informed. Learn from other's
mistakes. You could not live long enough to make them all yourself." - Hyman
George Rickover (1900-86), Admiral, US Navy, advocated development of
nuclear subs & ships

The Chartered Life Underwriter (CLU) and Chartered Financial Consultant
(ChFC), designations owned and exclusively offered by The American College,
signify the highest standards of academic study and professional excellence
in the financial services industry.

"Brent D. Gardner, ChFC" <bgardner20[at]cox.net> wrote in message
news:5bgLb.9071$zf.6558[at]okepread05...
- quote -

He didn't commingle, though. I think that was the point Rich was trying to
make.

paulmaf[at]aol.com (PaulMaf) writes:

- quote -

Oh, good point. I remember asking about that on
MTM after it passed. I believe the answer was
"Yes, but..."

Ed Z?

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

"PaulMaf" <paulmaf[at]aol.com> wrote in message
news:20040108142103.19161.00002184[at]mb-m13.aol.com...
- quote -

Thanks all for setting me straight. I guess that's the only way it *could*
work.

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Didn't that change with the last law change?

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No!

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NO, unless after you put it into a regular IRA you rolled into a Roth.

"Brent D. Gardner, ChFC" <bgardner20[at]cox.net> writes:

- quote -

It's a meaningless question because the taxable portions of IRA
and 401(k) withdrawals are taxed identically. And the same
early withdrawal[*] and mandatory minimum distribution rules
apply to both as well.
[*] except for age 55+ penalty waiver rule when taking money
from the 401(k) plan of the emplyer you just left when you
are 55+.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

Chris wrote:
- quote -

Why?

- quote -

When do you plan to take distributions? Did any of your 401k plans
contain company stock?

-Tad