@Boyan
Really, my point is to be aware of the differences between plans because the rules are different. Moving money into a 401(k) may have some advantages but may also have disadvantages. Some examples:
| IRA |
401(k) or other qualified workplace plans |
| Unlimited investment choices |
Investment choices may be limited by the employer
|
| Unlimited withdrawals any time for any reason (may be subject to a penalty) |
No withdrawals while you are employed by the plan sponsor, unless the plan allows for hardship withdrawals and you meet the plan's definition of hardship (withdrawals still subject to penalty). (**A plan may permit employees to make withdrawals after age 59-1/2 even if they continue to work, but is not required to permit such withdrawals.)
|
| Some options for penalty-free withdrawal such as higher education expenses, first time home buyer, or medical expenses during a period of unemployment |
Many fewer options for penalty-free withdrawal; first time home buyer, medical expenses and higher education expenses not penalty-free
https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distri...
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| Penalty-free withdrawals after age 59-1/2 |
Penalty-free withdrawals at age 55, but only if you separate from service from the plan sponsor. (If you have a 401(k) with company A and separate before age 55, you are not penalty-free until age 59-1/2, even if you become unemployed or retire.)
|
Since you mentioned earlier withdrawals from the 401(k), make sure you understand that last point, it's only penalty-free at age 55 if you separate from service from the plan sponsor at age 55 or older. If you worked for company A until age 50, then switched to company B, and you retire from company B at age 56, you can withdraw your qualified plan from company B, but you can't withdraw your funds from company A without penalty until age 59-1/2. (You can avoid that if you rollover over your plan from company A into company B before you separate, but you have to plan ahead, remember to actually do it, and company B has to accept rollovers.) If you work for company A and separate at age 54, and don't get a new job, or your new job doesn't have a plan that accepts rollovers, your company A funds will incur a penalty unless you wait until age 59-1/2. Also, your workplace plan might not permit any withdrawal even after age 59-1/2 if you are still employed with the sponsor.
If you understand the limitations and differences in the rules, and still feel that rolling over your IRA into a workplace plan meets your investment needs (so you can split out the after-tax basis and convert it to a Roth IRA), then go ahead.
