401K Rollover to Money Market

[scagnt83]

Direct rollover to mm IRA (1 per/yr) then trustee to trustee transfer (unlimited) to annuity IRA. Problem solved.

The indirect rollover (taking a check) can get messy. Plus you have to worry about 20% withholding.

Of course, if she's just going to spend the 20k, have her make a w/d from the existing plan then just roll the balance to the annuity.

Pretty much. But considering that the group he is talking about does not offer 401Ks, the first thing to do is find out exactly what type of QP it is

 

[jmhalvo]

Pretty much. But considering that the group he is talking about does not offer 401Ks, the first thing to do is find out exactly what type of QP it is

I don't believe the first rollover counts. I think the "one per year " rule is an IRA to IRA rule only ----------

If she deposits the check into her account and than rolls over to an IRA Annnuity and a IRA Money market than that would be 2 rollovers in a 12 month period. The last one would be fully taxable. I don't think that would be a good situation.

 

[DHK]

I don't believe the first rollover counts. I think the "one per year " rule is an IRA to IRA rule only ----------

Just for clarification:

Stop IRA rollovers

IRA guru Ed Slott is warning advisors to notify their clients of the recent tax court ruling that says IRA holders can do only one IRA-to-IRA rollover per year, which runs counter to the IRS interpretation of the tax code.

The recommended way to move money from IRA to IRA is via direct transfers, where the money goes directly from one IRA to another — and the holder doesn’t touch the money.

However, in the Jan. 28 tax court decision, the petitioners were transferring money from IRA to IRA using direct rollovers, where the money is payable to the IRA holder, but the money has to be put back into another IRA within 60 days.

 

[scagnt83]

Just for clarification:

Stop IRA rollovers

I think jmhalvo's point is that this would be from a Qualified Plan to an IRA. However I think the rule still applies since technically an IRA is a type of Qualified Retirement Plan (even though most people dont think of it that way)

 

[jmhalvo]

I think jmhalvo's point is that this would be from a Qualified Plan to an IRA. However I think the rule still applies since technically an IRA is a type of Qualified Retirement Plan (even though most people dont think of it that way)

no, the article from Slott is clear: this is an IRA rule ONLY. I also remember getting wrong on CFP practice tests

 

[scagnt83]

no, the article from Slott is clear: this is an IRA rule ONLY. I also remember getting wrong on CFP practice tests

Slott didnt say anything about other types of Qualified Plans, so you cant base that just from that article.

However, I did research it and you are correct: Treasury Regulation 1.402(c)-2, Q&A-16

The reason why is that technically the rule applies to accounts that the individual owns. And a 401k is held and owned by a trust, not the individual.


(so that means that my other post was correct in that he could roll out of the 401k into 2 different IRAs. even though that is still the complicated way to do it)

 

[AnonymousOne]

Moving the money into a money market is uneccesary and not in the clients best interest.

 

[scagnt83]

Moving the money into a money market is uneccesary and not in the clients best interest.

Unless the client wants liquidity with that portion of the funds. But the OP never mentioned that.

 

[AnonymousOne]

Unless the client wants liquidity with that portion of the funds. But the OP never mentioned that.

Bencor is liquid.
(20 characters)

 

[scagnt83]

Bencor is liquid.
(20 characters)

And what is your point? The OP said they cant do a partial transfer... so assuming they want away from the 403b; if they want immediate liquidity with that portion then a MM would be a good option.

And the 403b is liquid. But assuming its in the market, they are not guaranteed to have the amount they need liquid like a MM.