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Under what circumstances, if any, is it possible to contribute additional money to a Rollover IRA where the funds originally came from a 401k?</i.

Are Rollover IRA's basically considered to be Regular IRA's with regards to the annual contribution limits, criteria for eligibility, etc.?


It used to be that you had to keep rollover IRAs separate from other IRAs if you thought that you might want to roll the funds back into another type of retirement plan such as a 401(k) at a new employer. However, the rules have been changed so that you can now roll funds from just about any retirement plan into any other provided the plan allows it.

Your rollover IRA can accept new contributions subject to the usual rules for IRA contributions (annual maximums, income limits for deductibility, etc.)

Last question... I'm in a situation where I'm starting a new job next week. Once I'm eligible for their 401K (90 days), I'm considering rolling over a rollover IRA I have as well as my previous company's 401K just to make the bookkeeping easier on me. Is this a good idea, or would I be better served by leaving the money spread out? I realize this is a case-by-case situation, but any general advice would be appreciated.


Combining the plans to minimize paperwork is often desirable. Leaving 401(k) money at an old employer is usually foolish (small f) because it is more likely that you'll lose track of it (or they'll lose track of you). IRAs generally provide more flexibility in investment choices though some 401(k) plans are better than others in this regard.

The key differences that you should keep in mind between IRAs and 401(k)s are that you can use up to 10K of IRA money (but not 401(k)) for a first time home purchase without paying early distribution penalties (though tapping your retirement funds should be strongly discouraged).
If your plan allows it, you can borrow from your 401(k) (but not your IRA). However, 401(k) loans are payable in full if you leave the job for any reason. Unpaid loans are subject to income tax and penalty. Penalty-free distributions can begin at age 55 from a 401(k) if you are no longer working for the company, but not until 59 1/2 from an IRA. 401(k) accounts are somewhat better protected from creditors than IRA accounts.

If it were my money, I would definitely move the old 401(k). I would move it to the rollover IRA because I value the greater investment flexibility more than the added creditor protection and possible earlier access. I have no intention of tapping my retirement funds prior to retirement. Of course, you should make the choice which is most comfortable for you.

Ira
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