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Greetings, bgamble, and welcome.

<< 1. My wife is leaving a job where she has only about 3k in a 401k. We currently have an account setup with Ameritrade, so can her ex-employer simply wire the money to Ameritrade (who I assume can set that up as a traditional IRA)??
2. Her new employer (as a "city" employee) does not offer a 401k. But they do offer a "retirement pension" plan where they alone contribute X% of her pay to an account where she is allowed to pick from a rather limited number of mutual funds. If she leaves this job during the first 5 yrs, she only gets to take a "pro-rated" amount with her. ** Question: can we contribute 2k/yr to a traditional IRA (i.e. before taxes) also? Pls lemme know if I don't have enough info for this one.>>

Transferring the 401k to an IRA with Ameritrade is almost that simple, but not quite. Your wife will have to establish a separate account for the IRA. Ameritrade can walk her through the steps necessary as can her plan administrator. She should tell both she wants to arrange for a direct custodian-to-custodian transfer of the 401k to the IRA. Such a transfer avoids any potential tax hassles. Again, both her plan administrator and broker can guide her through the necessary steps.

You may ALWAYS contribute up to $2K per year to an IRA regardless of coverage under a retirement plan through work. The only question is "Will the IRA contribution be deductible?" If her new plan is a qualified retirement plan like a 403b (and by your description it sounds as if that's the case), then the deductibility depends on your joint Adjusted Gross Income. This year your AGI may be $50K or less for full deductibility. You can deduct part between $50K and $60K, and nothing above $60K. If you determine the contribution will be nondeductible, then the $2K should go to a Roth IRA for the ultimate tax free withdrawal.

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