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Author: edcosoft Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75616  
Subject: Re: bailing out Date: 8/16/1999 11:30 PM
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rem50: "I will retire july 2000. I plan to rollover my lump sum pension
and the pre-tax portion of my 401k into a self directed IRA at my online
broker. The after-tax portion if my 401k will go into my brokerage
account.
I presently have a Roth IRA with my broker.....can I roll it into my Roth,
or must I open a traditional IRA.
If I can use the Roth, are the SEPP rules the same??
Am I missing something?? Thanks for your time."

First you must roll over into an IRA (no taxable distribution), then into a Roth not your present one. (fully taxable at your top tax bracket and subject to some income limits). After-tax portion direct to brokerage non-taxed (as you know).
You may be missing out on an attractive tax coup by not looking into Lump Sum Distributions. Depending on the amounts and your tax brackets it may be advantageous if you can keep the funds relatively untaxed after the Distribution (like don't use them and let them accumulate in a tax managed Index fund). Your spouse, and heirs, get a step-up in basis upon death. If the Distributions are below $250K each, and your tax bracket 28% or more, it is usually advantageous.
IF these are truly different Kinds of Plans (even from the same employer), they can be handled seperately contrary to what many will tell you. See discussion in CCH Tax Management, NOT other sources. Even the IRS is cagey on the subject. Read the instructions for Form 4972 and consider that you are a different "plan participant" "kind of plan" and hence for each 4972 you complete. Five year averaging ends this year. Ed
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