Finance people - got a question

[Just Jack]

Want to consolidate my retirement funds, what are the pros/cons of cleaning out my IRA that I haven't put anything in for years, and putting that money into my companys 401K that gets money added (with match) every payday?

[KD in CA]

The 401(k) match is almost certainly only on new contributions, not transfers, so if you transfer a balance from an IRA to a 401(k) you wouldn't get a match. In fact, I'm not even sure you can roll an IRA into a 401(k); I suppose it's possible but I've never heard of someone doing it.

 

If you are thinking of cashing out the IRA and then upping your 401(k) contributions to get more match, my guess is that such benefit would be largely if not entirely offset by the taxes and penalties you'd incur from taking money out of an IRA before retirement, so that's probably not a good idea.

 

A better idea might be to convert the IRA into a Roth IRA and then start making contributions to it, taking advantage of the generous tax benefits. Eventually you'll leave your job and you'll want to roll your 401(k) into something not controlled by your former company -- i.e., your IRA.

 

btw...what is the match amount and max in the 401(k)?

 

 

The contents of this post should be considered for educational purposes only and not considered financial, legal, or investment advice.

[Just Jack]

The 401(k) match is almost certainly only on new contributions, not transfers, so if you transfer a balance from an IRA to a 401(k) you wouldn't get a match. In fact, I'm not even sure you can roll an IRA into a 401(k); I suppose it's possible but I've never heard of someone doing it.

 

If you are thinking of cashing out the IRA and then upping your 401(k) contributions to get more match, my guess is that such benefit would be largely if not entirely offset by the taxes and penalties you'd incur from taking money out of an IRA before retirement, so that's probably not a good idea.

 

A better idea might be to convert the IRA into a Roth IRA and then start making contributions to it, taking advantage of the generous tax benefits. Eventually you'll leave your job and you'll want to roll your 401(k) into something not controlled by your former company -- i.e., your IRA.

 

btw...what is the match amount and max in the 401(k)?

 

 

The contents of this post should be considered for educational purposes only and not considered financial, legal, or investment advice.

I understand they won't match money I move in, I was just mentioning that in case it made a difference in opionion. My employer matches 5%, which is what I contribute currently. I'm looking at this more to keep everything in one place than have mutiple accounts.

[KD in CA]

I understand they won't match money I move in, I was just mentioning that in case it made a difference in opinion. My employer matches 5%, which is what I contribute currently. I'm looking at this more to keep everything in one place than have multiple accounts.

 

If he matches up to 5% of your salary, than IMO you are putting the correct amount into the 401(k). Make any additional contributions to the IRA (and research the Roth option).

 

Nothing wrong with having multiple accounts (I mean really, it's two, not ten). Eventually you will need an IRA anyway.

[HereComesTheReignAgain]

You should be able to roll your IRA into a 401(k) if all the contributions were tax deductible. There really is no benefit to doing so unless you prefer the 401(k) investment options over the IRA options. In that case you still may be better off finding a better IRA to move your account to. If you decide to remove funds from your IRA, make sure you won't be triggering any back end sales charges or other penalties from the IRA provider that may be based on the amount of time you leave your contributions in their plan.

[Chef Jim]

If you plan allows it and you like fewer choices, less control, no black out period protection, and the inability to convert to a Roth, and lack of transparency of fees...sure have at it. In other words I recommend against it.

[aussiew]

A better idea might be to convert the IRA into a Roth IRA and then start making contributions to it, taking advantage of the generous tax benefits. Eventually you'll leave your job and you'll want to roll your 401(k) into something not controlled by your former company -- i.e., your IRA.

 

Very good advice!