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When you have money in several accounts and you’d like to have that money consolidated in one place, the question comes up – Which type of account can be tax-free rolled over into which other type of accounts?
Thankfully, the IRS has provided a simple matrix to help with this question. At this link you’ll find the matrix, sourced from IRS Publication 590.
In terms of explanation, here are a few rules to remember:
You can generally rollover one account of any variety (IRA, Roth IRA, 401(k), and so on) into another account of the exact same type.
You can rollover a Traditional IRA into just about any other tax-deferral plan, including 401(k), 403(b), 457(b), as well as a SEP IRA. The same goes for each of the accounts in reverse as well as between all of these types of accounts. In general, employer plans such as 401(k), 403(b) and 457(b) plans are not eligible to rollover until the employee has left the job.
You can also rollover any of these accounts into a Roth IRA – but you’ll have to pay tax on the rollover amount. This is known as a Roth Conversion.
A SIMPLE IRA generally cannot accept a rollover of any other type of account (other than another SIMPLE IRA) into the account. On the other hand, a SIMPLE IRA can be rolled over into any of the other tax-deferred plans – IRA, 401(k), 403(b), 457(b) or SEP IRA – but only after the SIMPLE IRA has been established for at least two years.
A Designated Roth Account (DRAC), which is part of a 401(k), 403(b), or 457(b) plan, can only be rolled over into another DRAC or a Roth IRA. Likewise, a Roth IRA is only eligible to be rolled over into another Roth IRA.
Sterling Raskie, MSFS, CFP®, ChFC®
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And if you’ve come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed “advisor’s advisor”.