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Author: dfmcleod Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: Closed 401K account - transfer to IRA? Date: 3/15/2001 11:14 AM
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My wife left her last employer about a year ago. Her balance in her 401K was so small (about $1500 or so) that they paid the amount, less some taxes, to her in the form of a check.

Can I deposit this into a traditional IRA or ROTH IRA account? If so, do I need to deposit additional funds to make up the taxes already taken out? If I roll this over to an IRA, does this amount still count towards my taxable income for 2001? If not, what is the tax benefit to depositing the funds into an IRA versus just spending the money?

I know I've got a lot of questions, so if there is an online resource that addresses these questions, please feel free to direct me there rather than answering all of my questions.

Thanks in advance for your help.
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Author: pmarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48460 of 121061
Subject: Re: Closed 401K account - transfer to IRA? Date: 3/15/2001 11:38 AM
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My wife left her last employer about a year ago. Her balance in her 401K was so small (about $1500 or so) that they paid the amount, less some taxes, to her in the form of a check.

Can I deposit this into a traditional IRA or ROTH IRA account?


Not any more you can't. The time limit for rolling it into a traditional IRA was 60 days from the issuance of the check. (If, by chance, you're within that 60-day period, check Publications 575 and 590 for rollover information.)

All this was explained in the paperwork no one read when she left the job.

Phil Marti
VITA Volunteer

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Author: dfmcleod Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48484 of 121061
Subject: Re: Closed 401K account - transfer to IRA? Date: 3/15/2001 5:12 PM
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Thanks for the reply. We are still within the 60 day period so I plan to open up an IRA account and deposit the amount of the check, plus the amount with-held into the new IRA.

I have two new questions:
1) do I need to deposit the exact amount of the distribution plus whatever was withheld? Or can it be slightly more? I'm assuming it can't be any less, right?

2) Will this count towards the $2000 annual contribution to an IRA for my wife?

Thanks,
Doug McLeod


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Author: pmarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48485 of 121061
Subject: Re: Closed 401K account - transfer to IRA? Date: 3/15/2001 5:35 PM
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1) do I need to deposit the exact amount of the distribution plus whatever was withheld? Or can it be slightly more? I'm assuming it can't be any less, right?

The upper limit is the check plus the withholding. Less and you have a taxable distribution subject to the 10% penalty. Anything more counts as a current year contribution and also eliminates the "conduit" nature of the IRA.

2) Will this count towards the $2000 annual contribution to an IRA for my wife?

Rollovers do not count against your contribution limit.

Phil Marti

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Author: dfmcleod Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48537 of 121061
Subject: Re: Closed 401K account - transfer to IRA? Date: 3/16/2001 12:04 PM
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Thanks very much for your help!

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