Combining Traditional IRA and Rollover IRA
What would be the reasons for NOT to combining a regular Traditional IRA with a Rollover IRA? A client of mine has several of each type and wants to simplify things and reduce the number of account statements he gets each month. Would the answer be different if some of the pre-rollover accounts (i.e., 401k plans) had both employer and employee contributions?
Permalink Submitted by Alan Spross on Sat, 2009-09-12 02:44
The only benefits for keeping rollover (conduit) IRA accounts separate from those that received regular contributions are:
1) In the event that he ever wants to roll his IRAs into an employer plan such as a 401k, many such plans will only accept rollover IRA accounts and will not accept contributary accounts. Of course, many plans will not accept any incoming IRA rollovers as well.
2) If he has (or will ever have) over 1 million in IRA balances, the accounts that were employer plan rollovers have unlimited dollar protection under the federal bankruptcy act. Other IRA accounts are protected up to 1 million in the aggregate. This would only be an issue if he lives in a state that does not fully protect IRA balances under state laws.
Those are the only potential benefits. The rollovers can be combined in a single IRA and the non rollovers in another IRA account and still cut down on paperwork and perhaps fees. Even with those two benefits, either or both may well not apply in specific situations. It does not matter if a 401k held just employee contributions or also had matching contributions in the account.
Permalink Submitted by Rick Spillane on Sat, 2009-09-12 18:26
Thank you for such a prompt and complete reply.