Author Topic: 401k Rollover applies to which contribution limit?  (Read 564 times)

Mesmoiselle

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401k Rollover applies to which contribution limit?
« on: May 13, 2018, 07:06:22 AM »
I already put max ($5500) in my ROTH IRA at the start of the year. Insert new job where I have access to a 401k, so I set my contribution to 43%. One contribution of about $1100 gets in before Employer and I decide to split ways.

Last time I had a 401k I rolled it over to a traditional IRA. But googling makes me think that if I rollover this 401k to my IRA account, that it'll be counted as a contribution to the IRA limit of $5500 which I've already hit, not the 401k limit of $18,500.

Anyone with experience available to clarify?

If it works above, I'd need to leave it where it is or transfer it to new employment's 401k correct?

terran

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Re: 401k Rollover applies to which contribution limit?
« Reply #1 on: May 13, 2018, 08:12:16 AM »
Rollovers do not effect contribution limits in any way. You contributed $1100 to a 401(k), so this effects your $18.5k limit no matter what you do next (rollover, leave it in the 401(k), take a taxable distribution, etc), but not your $5.5k limit.

You are limited to a single indirect rollover per year (you take the distribution then contribute to your IRA as a rollover), and it must be completed within 60 days, so it might be best to complete a trustee to trustee rollover (the 401(k) administrator sends a check directly to the IRA administrator and you never touch the money). The easiest way to handle this is likely to be to get the IRA administrator to help you as they have the incentive to get it moved over, but you may need someone at your former employer to sign off saying you've separated from service.

Mesmoiselle

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Re: 401k Rollover applies to which contribution limit?
« Reply #2 on: May 13, 2018, 08:19:30 AM »
thanks @terran I'll start talking to folks Monday (tomorrow). I'd much rather have the money with Betterment. ^^

terran

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Re: 401k Rollover applies to which contribution limit?
« Reply #3 on: May 13, 2018, 08:30:09 AM »
Another something to ponder: why Betterment? Is the extra fee worth it as compared to low cost index funds or ETFs at Vanguard, Fidelity or Schwab? Is your income high enough to benefit from the tax loss harvesting features?