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In April of this year I rollovered my 401K to a Mutual Fund IRA. Since then, I've been learning
alot on this site as well as reading books about investing and decided that I would like to transfer
my IRA account to a discount brokerage and invest in the F4. I thought that I read somewhere that
once you do a rollover you have to wait at least one full year to roll it over again, but you can
transfer as many times as you'd like. Would this be considered a rollover and do I have to wait
until April 2000 to begin the F4 plan?

One more question: I understand that when you rollover your 401K to an IRA you shouldn't
contribute any more to that account in case you decide to roll it back over to a 401K plan with
your new employer. Since I have no intentions of rolling it into a new 401K, is it ok to contribute to
this account? Or is it better to open a separate IRA account?

Thanking you in advance for your help.

Miki
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I thought that I read somewhere that once you do a rollover you have to wait at least one full year to roll it over again, but you can transfer as many times as you'd like.
AFAIK, a 'rollover' actually pertains to 401k/IRA/pension money that was given to you, held for up to 60 days, then 'rolled over' into an IRA. This can only be done once every 12 months. If you had your money moved from your 401k directly to your IRA, by your custodians, this is a 'transfer', and there is no limit on transfers.

Since I have no intentions of rolling it into a new 401K, is it ok to contribute to this account? Or is it better to open a separate IRA account?
Yes and maybe. The laws have been clarified regarding contributing to rollover IRAs and there is no problem if you are not going to move the money into another 401k. OTOH, I read somewhere that you should keep your deductible and non-deductible IRA accounts separate. The idea is that when you start withdrawing, you can choose which account to draw from, affecting your taxes. (Is this correct, Pixy?) Since your rollover IRA would be considered a deductible IRA, you should only contribute to it if your entire contribution is deductible. If what I just typed is wrong, it makes no difference.

Zev
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Zev writes:

<<OTOH, I read somewhere that you should keep your deductible and non-deductible IRA accounts separate. The idea is that when you start withdrawing, you can choose which account to draw from, affecting your taxes. (Is this correct, Pixy?) >>

Not quite. Traditional IRAs are treated as one giant pool at the time of withdrawal. All are lumped together regardless of which one is used for the distribution. Thus, when nondeductible contributions are involved, part of any distribution will be free of tax and part will be taxed based on the ratio of those contributions to the market value of the IRA pool in the year of the withdrawal. When nondeductible contributions are made, Form 8606 must be filed with the income tax return for that year. Those forms should be retained forever because the are the proof the nondeductible contribution was made. When distributions start, Form 8606 is again filed to show what part of that distribution is free of tax. See IRS Pub 590 for details.

Regards..Pixy
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Pixy writes,

<<OTOH, I read somewhere that you should keep your deductible and non-deductible IRA accounts separate. The idea is that when you start withdrawing, you can choose which account to draw from, affecting your taxes. (Is this correct, Pixy?) >>

Not quite. Traditional IRAs are treated as one giant pool at the time of withdrawal. All are lumped together regardless of which one is used for the distribution.


This may be a fine point, but I don't think you can treat your IRAs as "one giant pool" if you're taking SEPP distributions. If you use only one IRA to calculate an SEPP distribution, you may only withdraw your distribution from that IRA.

intercst
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Intercst sez:

<<This may be a fine point, but I don't think you can treat your IRAs as "one giant pool" if you're taking SEPP distributions. If you use only one IRA to calculate an SEPP distribution, you may only withdraw your distribution from that IRA.>>

I agree you select the IRA for the SEPP, but to be honest I'm not sure you are correct or incorrect as to computing the taxes on the distribution. My gut reaction is you still pool all the IRAs to see how much of the SEPP will be taxed. I'll do some checking on that issue. In the interim, perhaps someone else like TheBadger can answer off the top of the head.

Regards..Pixy
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Pixy writes,

My gut reaction is you still pool all the IRAs to see how much of the SEPP will be taxed.

That's correct. You do lump all your IRAs together to determine what percentage of the SEPP distribution is "non-taxable." (Assuming you have some tax-paid contributions residing in any of your IRAs.) However, you must actually withdraw your SEPP distribution from the IRA that you based your SEPP calculation on.

intercst
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Intercst writes:

<<That's correct. You do lump all your IRAs together to determine what percentage of the SEPP distribution is "non-taxable." (Assuming you have some tax-paid contributions residing in any of your IRAs.) However, you must actually withdraw your SEPP distribution from the IRA that you based your SEPP calculation on.>>

Okay. I was puzzled why you wrote the original comment, but then I noted that I didn't include the phrase "for the purposes of taxation" in the original response I made. Sorry for the confusion. :-)

It still doesn't change the response to the original comment about keeping deductible and nondeductible contributions in different IRAs, though. It matters not from whence the withdrawal comes. When there's a mix of contributions, part of the withdrawal will be taxed and part won't, and to determine those parts the IRAs are treated as one giant pool.

Regards..Pixy
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I am about to buy a business and want to use my IRA funds to do so however I can not borrow against them from schwab where they are resident.Is there a way for me to use the funds without paying a penalty?Perhaps I can transfer the funds to another account and then borrow against it or could the business itself be a qualified plan ?
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Greetings, Jeffrnahar, and welcome. You asked:

<<I am about to buy a business and want to use my IRA funds to do so however I can not borrow against them from schwab where they are resident.Is there a way for me to use the funds without paying a penalty?>>

No, there is no way you may use your IRA funds as collateral for a loan. Such use is expressly prohibited by law.

<<Perhaps I can transfer the funds to another account and then borrow against it or could the business itself be a qualified plan ?>>

No, there is no way you can do either. Again, using the funds as collateral is against the law. Investing in your own business within the IRA or a qualified retirement plan is also against the law. That's considered a prohibited transaction.

The only way you may use these funds in the purchase is to take the money from the IRA, pay the income taxes due and pay a 10% early withdrawal penalty on top of that if you're younger than age 59 1/2.

Regards..Pixy
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