Message Font: Serif | Sans-Serif
No. of Recommendations: 0
I want to rollover a 401k from a company I just left into my personal contributory IRA account. I was told by my broker e*trade that this was possible however that there may be tax consequeneces when "commingling" funds.

Does anyone know what these consequences are? I'm 28 and the total value of the IRA after combining will be less than $10,000.

The tax consequences are that if you roll the 401(k) proceeds into a new IRA and do not add any other funds to the IRA, you would have a Conduit IRA. In the future, you might be able to roll the contents of this Conduit IRA into a new company's 401(k) plan.

If you commingle the 401(k) proceeds with other funds in an existing IRA, you will lose this ability.
A young person with presumably many (or at least several) years of employment ahead may, at some point in the future, enjoy having a large 401(k) rather than a large IRA, because it is possible to borrow against a 401(k) but not an IRA. If you had to make use of the IRA funds, you would have to pay taxes and a penalty if under the age of 59-1/2.

Even if you think this would never apply to you, I think E*Trade deserves credit for pointing out (even if somewhat vaguely) the possible implications of doing what you asked them to do.

Hope this helps,
Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.