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Author: phooley Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121219  
Subject: Re: Commingling IRA funds? Help! Date: 3/28/2000 1:32 AM
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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,
Ron
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