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I have a question about rolling some funds into an IRA
Posted on 9/21/24 at 1:38 pm
Posted on 9/21/24 at 1:38 pm
25 years ago I worked for four years for a company and had totally forgotten that they had a little pension program.
I got something in the mail about them offering to let us take it out as a lump sum payment or rollover, etc. I was surprised as shite when I logged on and saw that it's $16,000.
I opened an IRA with Fidelity and have set this pension up to rollover next month.
Question is am I going to get some kind of tax hit by putting that much into one IRA since it's over the $7,000 that I read was allowed per year?
I got something in the mail about them offering to let us take it out as a lump sum payment or rollover, etc. I was surprised as shite when I logged on and saw that it's $16,000.
I opened an IRA with Fidelity and have set this pension up to rollover next month.
Question is am I going to get some kind of tax hit by putting that much into one IRA since it's over the $7,000 that I read was allowed per year?
6
Posted on 9/21/24 at 1:45 pm to notiger1997
No tax or legal advice, but google the IRC rule on it. Sounds like you know the answer but ask a CPA or tax lawyer friend if you got one. The IRS is on a tear right now with completely legitimate rollovers back into the same IRA account within the 60 day rollover period (that are clearly within the timeline, at least form TY 2021) and while this can be solved after a 90 day letter and filing a Tax Court Petition, it shouldn't get that far except for the IRS is puling the old "we can't read your fax with all of the relevant documents of the time period the money was withdrawn and re-deposited into the IRA" (probably computers at the Service) but can create an issue where you are having to pay for a tax lawyer to file in the Court (although one can do it themselves) but hardly worth the trouble.
TLDR: seek advice before hand.
TLDR: seek advice before hand.
Posted on 9/21/24 at 2:09 pm to notiger1997
There are no limits on rolling 401k funds into an IRA and those funds are not counted in your contributions at any point. Meaning you could roll over $16,000 at any point during the year and still contribute the 7k annual max.
Posted on 9/21/24 at 7:34 pm to notiger1997
I think you'll get taxed on the $16k as income?
Posted on 9/21/24 at 11:59 pm to Asharad
you won't?
Posted on 9/22/24 at 6:54 am to Asharad
No.
The OP is not taking constructive receipt. It's not going into his personal bank
account. It's being transferred directly to a rollover IRA.
Same thing happened with me when I retired. Just rolled the 401K directly into a Fidelity account. No tax liability.
The OP is not taking constructive receipt. It's not going into his personal bank
account. It's being transferred directly to a rollover IRA.
Same thing happened with me when I retired. Just rolled the 401K directly into a Fidelity account. No tax liability.
Posted on 9/22/24 at 7:29 am to notiger1997
Just make sure it goes into traditional IRA, then no taxes. Have them send the funds directly to fidelity. Check will be made out to fidelity FBO notiger1997
If you go Roth route you will be taxed
I just rolled about 120k for my wife from her old job into new traditional IRA. Takes about 2 weeks for them to do it
If you go Roth route you will be taxed
I just rolled about 120k for my wife from her old job into new traditional IRA. Takes about 2 weeks for them to do it
Posted on 9/22/24 at 2:37 pm to notiger1997
You will receive a 1099-R for the $16,000. As long as you roll the full amount into your regular IRA you will report it as such and not taxed. It is preferred for the pension to send the proceeds directly to your Fidelity account or if the proceeds are sent to you they must be deposited into Fidelity within 60 days to effect a tax-deferred rollover.
Posted on 9/22/24 at 5:23 pm to notiger1997
quote:
Question is am I going to get some kind of tax hit by putting that much into one IRA since it's over the $7,000 that I read was allowed per year?
I did this last year. I had a small pension from a previous company and they gave the option of converting to a lump sum which I did. It was about double your amount. If done correctly, there will be no taxable income to you.
First, make sure you opened a "rollover" ira account at Fidelity not a "traditional" ira account.
Second, at the old company see what options you have for receiving the lump sum/rollover distribution. The best way is for them to cut a check that is made out to Fidelity. I believe you will want the check made out to "Fidelity Management Trust Company".
If it's made out to you, then you have a limited amount of time to get that deposited before you get hit with taxes etc.
The old company should send you a 1099-R for that distribution. Make sure that box 7 has code 'G' in it. Otherwise you will owe taxes.
Posted on 9/22/24 at 8:13 pm to gpburdell
quote:
First, make sure you opened a "rollover" ira account at Fidelity not a "traditional" ira account.
The only benefit this offers is if you want to roll it over back into employer 401k plan but it is otherwise still a traditional IRA as far as tax purposes. If you do traditional you could keep contributing to it but rollover you would not want to add anymore money to it
Posted on 9/23/24 at 9:28 am to DaBeerz
quote:
If you do traditional you could keep contributing to it but rollover you would not want to add anymore money to it
Could you explain what you mean here? My (traditional) IRA started as a rollover when I left a long time employer and rolled the 401K. I’ve since rolled three more 401Ks into it, as well as a lump sum pension distribution. But I’ve also contributed to it over the years without issue.
Posted on 9/23/24 at 10:06 am to Asharad
Why even comment if you have no idea what you're talking about?
Posted on 9/23/24 at 10:20 pm to Jag_Warrior
quote:
Could you explain what you mean here? My (traditional) IRA started as a rollover when I left a long time employer and rolled the 401K. I’ve since rolled three more 401Ks into it, as well as a lump sum pension distribution. But I’ve also contributed to it over the years without issue.
Mine is the same way, I’ve rolled over 2 different 401k’s into traditional IRA and I keep adding to it. That’s not a problem, that’s what I do too.
The other dude was stating he should do a rollover IRA which is essentially a traditional IRA… but the goal of a rollover IRA is to keep rollover funds separate from any other funds in case you want to roll it back into another employer 401k. Apparently if you mix funds by adding more money into the rollover IRA then can not change it back to 401k…therefore a regular traditional IRA would be better. I don’t see why anyone would want to ever roll the money back into a 401k as IRA gives you more freedom and choices… so I have no idea why that poster said make sure it’s a rollover IRA.
Hope this makes sense. But you can google rollover Ira vs traditional IRA Reddit. Fidelity explained it on their subreddit
Posted on 9/24/24 at 5:14 am to DaBeerz
Ah, OK. I see what you mean now. I’ve never considered rolling money into an employer 401K plan either.
Posted on 9/24/24 at 5:30 am to iknowmorethanyou
quote:I was asking a question. Question has been answered.
Why even comment if you have no idea what you're talking about?
This post was edited on 9/24/24 at 5:33 am
Posted on 9/24/24 at 9:39 am to DaBeerz
quote:
I don’t see why anyone would want to ever roll the money back into a 401k as IRA gives you more freedom and choices… so I have no idea why that poster said make sure it’s a rollover IRA.
Backdoor Roth
ETA: Also if you're worried about creditors coming after you. A 401k is shielded from that by ERISA protections. IRAs do not have that protection if that's a concern.
This post was edited on 9/24/24 at 10:03 am
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