Author Topic: Case Study: Rollover IRA to 401k or not?  (Read 358 times)

Enea

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Case Study: Rollover IRA to 401k or not?
« on: September 08, 2017, 12:27:35 AM »
Topic Title: Reader Case Study - I hold 2k in a 401k and Fidelity is going to rollover in a traditional IRA

Life Situation: California, San Francisco, Software Engineer, H1-B holder under green card process.

Gross Salary/Wages: 160000$ no bonus and 13000shares in stock over 3 years

Individual amounts of each Pre-tax deductions 401k 3% No match on 401k

Other Ordinary Income: Nothing

Qualified Dividends & Long Term Capital Gains: Nothing

Rental Income, Actual Expenses, and Depreciation: Nothing

Adjusted Gross Income: Nothing


MDM

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Re: Case Study: Rollover IRA to 401k or not?
« Reply #1 on: September 08, 2017, 10:25:06 AM »
Enea, welcome to the forum.

The thread title asks a question, but the body of the post has only declarative statements.  What are your options, and what do you see as the pros and cons of each?

Enea

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Re: Case Study: Rollover IRA to 401k or not?
« Reply #2 on: September 08, 2017, 11:57:09 AM »
Hi MDM,

I have 3 options

1) keep money 2k on the traditional IRA
2) rollover the money from the IRA to the 401k.
3) use the back door and transfer 2k http://onemoredime.com/2015/11/11/back-door-entry-roth-ira/

Right now I am not able to evaluate the pro and cons of these possible options.
If somebody can help it would be appreciated

Thanks

MDM

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Re: Case Study: Rollover IRA to 401k or not?
« Reply #3 on: September 08, 2017, 12:37:48 PM »
1) keep money 2k on the traditional IRA
2) rollover the money from the IRA to the 401k.
3) use the back door and transfer 2k http://onemoredime.com/2015/11/11/back-door-entry-roth-ira/
Option 1 is probably the worst because it implies not putting anything into Roth.

If your 401k plan is good, option 2 may be the best.

By using the back door (see Backdoor Roth IRA - Bogleheads for more on that), you will pay taxes on the $2K currently in the tIRA when you convert everything to Roth in option 3.  Given your $160K/yr income, that's probably not worth worrying about.

Enea

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Re: Case Study: Rollover IRA to 401k or not?
« Reply #4 on: September 10, 2017, 01:16:37 PM »
Thanks for the advice!
I was thinking to open a wealthfront IRA with the 2k coming from the fidelity IRA and check how they handle the money over there.
I also hold a 10k SIMPLE IRA with vanguard that performs well and I am not moving money from there. It comes from another employer and I don't contribute on this account. It is just growing according the vanguard 500 Index.
I will keep the 401k with the new employer
I would invest 1000$ in bitcoin after they drop. I wish they drop to 2000$

That's my plan

Thanks

MDM

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Re: Case Study: Rollover IRA to 401k or not?
« Reply #5 on: September 10, 2017, 03:26:59 PM »
Good luck!

Do make sure you understand the pro-rata rule as applied to the backdoor Roth process before you proceed with it.

Goldielocks

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Re: Case Study: Rollover IRA to 401k or not?
« Reply #6 on: September 13, 2017, 11:11:49 AM »
Something to think about:

IRAs have better international tax treaty recognition than 401k's.  IRA's are generally recognized as pension plans to most other countries, and are the first savings vehicles recognized.

If you ever end up leaving the USA, this is worthy of consideration in your long term plans.   Often, you can convert your 401k to an IRA when you quit, but some of the tax treaty stuff doesn't want to see that happen in the same tax year as when you leave, so it is better to have a gap between converting it to IRA and transferring it out of the country.