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Financial Planning / Foolish 401(k)s


Subject:  Re: 401k rollover to IRA Date:  4/26/2000  8:42 PM
Author:  W401K Number:  7532 of 26116

Good question.
A 401k is typically rolled into what is called a "conduit" or a "rollover" IRA. What this means is that if you take money from a 401k and put it into a rollover IRA, you will then be able to transfer this money to a new employer's 401k at a future date if desired.
If the employee adds any other funds to this IRA, specifically, any deductible contribution such as the $2,000 contribution limit for IRAs then the employee loses the ability to roll it to the new employer's 401k. So, the old employer 401k money must be kept seperate from any other IRA contribution. I hope this isn't confusing. If the employee has an existing IRA, he can transfer his old 401k into the existing IRA if he chooses, he will then lose the ability to roll it inot a future employer's 401k.
I apaologize for not explaining it more clearly, but thats the IRS for you. If you have more questions, please follow up.


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