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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75529  
Subject: Re: HELP!401K rollover question Date: 5/15/1998 6:41 PM
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Eric106 in two queries said:

<<Help! I recently rolled over my 401K into a IRA.
Can I know put $2000 a year into the IRA, even if
I contribute to a new 401K in a new company?
Can I put in the $2k if I don't start a new 401K?>>
And:

<< Having a self-directed IRA (for me) is so nice, I can't see why I would want to roll it into an employer 401K
if I had the chance.

To me it seems better to be able to add 2k a year to my
IRA (non-deductable if I have a 401K ...), and do with
it what I want.>>

Others have already told you that you may contribute $2K to an IRA, but chances are the traditional IRA route may not be deductible if you're a participant in a qualified retirement plan at your job. This year you can't deduct such contributions if you're single and have an AGI of $40K ($60K for joint filers). If that's the case, then certainly the Roth IRA is the best route for you to go. Using the traditional, nondeductible IRA by contributing to your rollover IRA won't give you the tax-free withdrawal advantage that the nondeductible Roth will.

As to keeping the rollover IRA separate, there are a number of good reasons to do so. As someone else pointed out, the future is an unknown. Sure, you can beat most 401k plans for returns in a self-directed IRA, but there's no reason I see not to keep your options open. It's only a small administrative hassle to have two IRAs, and it preserves your flexibility just in case you ever change your mind. Mix monies, though, and that option disappears forever.

Regards….Pixy



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