Move some Roth IRA fund to another Roth IRA Account?

VAer — Mon, 19 Oct 2020 20:41:41 GMT

I have employer's retirement plan (government retirement plan, very similar to 401K, and you may consider it as 401K in this question), and I have Roth contribution.

I also have a Roth IRA account and have made the maximum contribution.

I would like to open a new Roth IRA (lower trading fee), but I am wondering if I can move some fund from 401k and/or another Roth IRA? Only moving some fund, keep the other Roth IRA open.

Thanks.

Re: Move some Roth IRA fund to another Roth IRA Account?

macuser_22 — Mon, 19 Oct 2020 21:31:53 GMT

Converting a Traditional 401(k) to a Roth IRA is taxable as ordinary income unless it is a 401(k) Roth (Designated Roth). You would need to ask the 401(k) plan administrator if it is ever permissible - not all plans allow that before retirement.

You can always have all or part of a regular Roth IRA in one financial institution rolled by direct trustee-to-trustee transfer to a different financial institution and that would be a tax-free rollover.

Re: Move some Roth IRA fund to another Roth IRA Account?

Opus 17 — Tue, 20 Oct 2020 16:16:05 GMT

@VAer wrote:

I have employer's retirement plan (government retirement plan, very similar to 401K, and you may consider it as 401K in this question), and I have Roth contribution.

You may absolutely NOT treat a "government retirement plan" as a 401(k) for tax planning purposes. Each type of qualified retirement account is controlled by a different section of the tax code and the rules are NOT the same. You will need to specify exactly what kind of account you have if you want specific advice.

Firstly, considering your existing Roth IRA. You can certainly open Roth IRA accounts at different brokers and transfer money between them, for example if they offer different investment vehicles or lower fees. However, this does not change your overall maximum contribution limit for the year. You can do one "rollover" per year (where you get a check and send it to the new trustee) but you can do unlimited direct transfers between the trustees.

Considering your work retirement plan: if you made after-tax contributions (similar in concept to a Roth IRA but technically not "Roth" contributions), you have 2 questions to consider.

1. Will the plan allow you to withdraw money or transfer it to a new custodian? My guess is you can only move money around if you quit or retire. If you are still employed you will have to ask the plan administrator.

2. If you are allowed to move your funds around, will it be taxed? Now the question becomes, do you only have after-tax retirement funds or a mix of pre-tax and after-tax? Because if you have a mix of pre-tax and after-tax funds, then any money you move will also be a pro-rated mix of pre- and after-tax, and transferring the pre-tax portion to a Roth IRA would be considered a conversion and would be a taxable event. Be extremely careful how you move the money. Assuming you quit or retired from the government job and are allowed to transfer the funds, make sure you only do a direct trustee to trustee transfer. If the money passes through your hands, it could be considered a taxable withdrawal and not only would you pay tax, you might not be able to put it back into the new Roth IRA.

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Move some Roth IRA fund to another Roth IRA Account?

Re: Move some Roth IRA fund to another Roth IRA Account?

Re: Move some Roth IRA fund to another Roth IRA Account?