@Chris411 wrote:
Thank you for the detailed reply.
Regarding to your second comment, do I have to close the IRA account? Can I just withdraw the contributed amount?
Using that method you would not be required to actually close the account but you would be required to withdraw the mistaken contribution plus any earnings attributed to the mistaken contribution. Since it is a new account and the only contribution is the mistaken one, that means withdrawing all the funds and leaving the account with a zero balance for a few days, until you initiate the rollover from the 401k. You may need to let bank #2 know to not close the account so they don't do it automatically.
And you should do the new (correct) rollover as a direct transfer from the 401k to the IRA bank, with no money passing through your hands.
It remains to be seen if you can correct this in a more simple way, once the other expert replies.
