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|Subject: Re: Which way to IRA?||Date: 6/9/1999 9:59 AM|
|Author: jocave||Number: 11163 of 72263|
I've determined that a self-directed IRA is where I want to put 401(k) money from a previous job. All well and good. However, I can't get a satisfactory (by that I mean knowledgeable) answer from my brokerage house about which type of IRA to choose. One guy says a 401(k) rollover goes into a non-contributory IRA, another says it's my choice between a conduit (rollover) account and a traditional account, but he can't tell me the difference between them. I know the difference, but I don't know the tax law.
Given my choice, I'd opt for the contributory account and would put in my $2000 per year. Anybody know the scoop on this? All advice appreciated!
Short answer: Your 401(k) can be rolled into a normal, every-day traditional IRA which you are then able to contribute to.
Long answer: It used to be that money from a 401(k) plan (or any other qualified retirement plan) *had* to be rolled into a conduit account to which you could not contribute. This allowed you to roll any conduit IRA into another employer's retirement plan. Recently (97?), the rules were relaxed so that you can legally mingle previous retirement plan balances with new contributions. If you do so, however, the account is "tainted" and may never be rolled into another employer's plan (not a big deal for fools). Many reps haven't caught up with this change and still believe the old rules apply. Their supervisor should be more clueful.
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