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Author: PilotBrad Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75340  
Subject: New Broker? Rollover? IRA? Date: 8/21/2003 3:58 PM
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My wife has an IRA at a broker, but I am starting to really hate the brokerage, and I want to transfer the assets to a new account at a new brokerage. She also has an old 401K, that is 100% company stock, which that has gone down the tubes, and should be sold and diversified.

So my choices so far are...
A) Transfer her IRA to a new broker, then transfer the 401K proceeds to the new IRA as well (future contributions would then make it a mix of tax-deferred and non-tax-deffered monies...see below).
B) Transfer her IRA to a new broker, and open another IRA for her 401K proceeds (keeps monies apart, but increases fees, and PITA factor).
C) Transfer her IRA to a new broker, then transfer her old 401K proceeds to her current 401K (probably the simplest solution, but 401K lacks flexibility).
D) Do nothing and have another glass of wine! ;-)

Both of us are in our early 30's, both have IRAs, and both participate in our respective 401Ks. Last year, our joint AGI last year was $180,000, so any contributions to our current IRAs are not tax-deductible, and a Roth conversion is out of the question.

Anyone have any suggestions or comments on any of the choices above?

Thanks,
PilotBrad

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Author: kimflournoy Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 36994 of 75340
Subject: Re: New Broker? Rollover? IRA? Date: 8/21/2003 4:46 PM
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Transfer to a no fee IRA brokerage account (like at Scottrade). I personally would put it into two separate accounts, since the PITA factor of mixing tax deferred and non deferred money is more annoying to me than just dealing with the paperwork.

I wouldn't transfer my 401(k) to a new 401(k) - seen problems with that happening, even with good options in the new plan. Why not put it into an IRA where you have full control?

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Author: Crosenfield Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 36995 of 75340
Subject: Re: New Broker? Rollover? IRA? Date: 8/21/2003 5:19 PM
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"the PITA factor of mixing tax deferred and non deferred money is more annoying to me than just dealing with the paperwork."

Lots of folks think they are going to get away from doing paperwork by keeping deferred and non-deferred in separate accounts.
Wrong.
When you start withdrawals, if you have deferred and non-deferred money in IRAs, you must total the balances of your IRAs, total the "basis"--the amount of non-deferred money you put in the IRAs, and divide the basis by the total IRA money. Then you multiply your withdrawal by that fraction and pay tax on it.
Whether the accounts are separate makes no difference.
So you might as well mix 'em, as you get the same PITA in either case. Now, if you want separate accounts because you want to buy Vanguard funds from Vanguard and Fidelity funds from Fidelity, that is a different matter.
Best wishes, Chris


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Author: dsemmler Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 36996 of 75340
Subject: Re: New Broker? Rollover? IRA? Date: 8/21/2003 5:25 PM
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A) Transfer her IRA to a new broker, then transfer the 401K proceeds to the new IRA as well (future contributions would then make it a mix of tax-deferred and non-tax-deffered monies...see below).

If it were me, I would transfer the IRA and the old 401(k) into one new IRA at the brokerage of my selection. As a matter of fact, I recently did this myself when I consolidated two old 401(k) accounts into my IRA that I had just recently opened with Vanguard. It is so nice having one place to manage that money now and the investment options are much better. It was quite foolish (small "f") of me to wait so long to do this.

As far as making non-deductible contributions to the IRA, you may be better off investing those funds in a taxable account. If you are planning on being a LTBH investor, that may work out to your advantage given the recent tax changes. Have you looked into that as a possibility?

dt

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Author: reallyalldone Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 36997 of 75340
Subject: Re: New Broker? Rollover? IRA? Date: 8/21/2003 5:43 PM
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Transfer to a no fee IRA brokerage account (like at Scottrade).

One downside of Scottrade is no mindless option - if you want to do monthly contributions to an IRA, you have to mail the check in - at least that's what they told me yesterday.

rad

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Author: PilotBrad Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 36998 of 75340
Subject: Re: New Broker? Rollover? IRA? Date: 8/21/2003 6:06 PM
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As far as making non-deductible contributions to the IRA, you may be better off investing those funds in a taxable account. If you are planning on being a LTBH investor, that may work out to your advantage given the recent tax changes. Have you looked into that as a possibility?

Absolutely, in fact, for the years since we have been above the limits of tax-deductibility, we have been investing solely in our 401Ks and taxable accounts, forgoing any additions to our IRAs.

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Author: yobria Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37000 of 75340
Subject: Re: New Broker? Rollover? IRA? Date: 8/22/2003 10:53 AM
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Transfer your accounts to Scottrade (Contrary to a post here, you can make electronic transfers into Scottrade accounts from your checking account).

Might as well keep the accounts separate, then you have the option of rolling the rollover 401k back into an active 401k (You'd only want to do this in rare circumstances, eg if you get sued, your 401k assets are protected but your IRA assets often aren't)

One of these years, take some time off work, lowering your income below the Roth conversion limit. in that year, convert over your nondeductible IRA to a Roth.

Nick



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