Author Topic: Advice on investments & question on moving accounts to Traditional IRA  (Read 1826 times)

DailyGrindFree

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Current situation:
  • 457B --> Maxing out - 18K
  • Roth IRA --> Maxing out - 5.5 K
  • Mrs.' Roth IRA --> Maxing out - 5.5 K
  • Taxable money is in Vanguard VTSAX Admiral
  • Not planning paying off the mortgage because the interest rate is 2.625%. Also, planning on selling the house next summer.
  • 25K of the money in savings and checking will be invested in a local business in the next month or so. Better return than stock market. Fingers crossed.

What I would like to do:
  • Open up an Vanguard Traditional IRA. Move my old employer's 401K [$20,995], Traditional IRA from Another company [$8,282], and Money Market SEP IRA [$2,251]to new Vanguard Traditional IRA. So, they are consolidated in one place.
  • Thinking about starting a home business for the Mrs. so we can open up a solo 401K or SEP IRA account for her to contribute to retirement
Do you see any issues with this plan? In addition, any other advice is appreciated.

Enigma

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Re: Advice on investments & question on moving accounts to Traditional IRA
« Reply #1 on: October 11, 2016, 07:07:13 AM »
I did the same...  rolled over all my old employer's 401ks and even TSA (Teacher Savings Account) to a Traditional IRA.

One major difference I am doing is trying to max out my Traditional IRA (instead of Roth IRA) during my high tax period of my career.  Later on if I decide to retire early I will slowly move over my earnings to a Roth IRA evading some of the taxes by a no salary for the year.

DailyGrindFree

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Re: Advice on investments & question on moving accounts to Traditional IRA
« Reply #2 on: October 11, 2016, 07:49:13 PM »
I found out that my $8,282 was in Rollover IRA, not Traditional IRA. So started a process to transfer it to Vanguard today to see how it goes. Once it is done I am going to move my old employer's 401K [$20,995] to the same Rollover IRA. Then the dilemma starts. What do I do with my Money Market IRA [$2,251]? If I transfer it to this same account it will be jumbled up with the rolled over old 401Ks. Does that mean this account looses its flexibility and becomes like a Traditional IRA? Does it even matter if I am not even planning on reverse rolling that money to another employers 401K in the future? My future plan is to do Roth IRA conversion right after early retirement anyway. So, what is the harm?  I think I started to mumble. :-) Any help would be appreciated.

Enigma

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Re: Advice on investments & question on moving accounts to Traditional IRA
« Reply #3 on: October 12, 2016, 06:14:02 AM »
A rollover IRA is the same as a Traditional IRA.  They call it a rollover IRA because it still has the flexibility to be rolled over again.  However, the moment you add money to the account, it should then change to a traditional IRA.

The money market IRA sounds to just be just a savings account.  Growing very slowly, conservatively, and safely.  If you roll that money over to Vanguard as well you can invest that in their Money Market account.

Frugalman19

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Re: Advice on investments & question on moving accounts to Traditional IRA
« Reply #4 on: October 12, 2016, 07:25:30 AM »
A rollover IRA is the same as a Traditional IRA.  They call it a rollover IRA because it still has the flexibility to be rolled over again.  However, the moment you add money to the account, it should then change to a traditional IRA.

Yep, rollover just lets the company know there are no contributions being added to it at this time and that its been moved from another institution, it is exactly the same as a traditional IRA.

MustacheAndaHalf

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Re: Advice on investments & question on moving accounts to Traditional IRA
« Reply #5 on: October 12, 2016, 10:37:16 AM »
Then the dilemma starts. What do I do with my Money Market IRA [$2,251]?
"Money Market" is not a type of IRA, by IRS definition.  This sounds like a specific business giving it that name.

There's SEP IRA, Traditional IRA, and Roth IRA... no money market IRA.  But a bank might not be able to invest your money in mutual funds, and "money market" might be a significant limitation on how you can invest the money within the IRA.

DailyGrindFree

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Re: Advice on investments & question on moving accounts to Traditional IRA
« Reply #6 on: October 12, 2016, 09:17:36 PM »
Then the dilemma starts. What do I do with my Money Market IRA [$2,251]?
"Money Market" is not a type of IRA, by IRS definition.  This sounds like a specific business giving it that name.

There's SEP IRA, Traditional IRA, and Roth IRA... no money market IRA.  But a bank might not be able to invest your money in mutual funds, and "money market" might be a significant limitation on how you can invest the money within the IRA.

It says my quarterly IRA statement. It sounds like IRA invested in Market like you said. If that is the case I assume I can roll this one also to my Vanguard rollover IRA, right? 
I attached the a copy of the statement.
Thanks for all the help.

MDM

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Re: Advice on investments & question on moving accounts to Traditional IRA
« Reply #7 on: October 12, 2016, 11:52:19 PM »
It says my quarterly IRA statement. It sounds like IRA invested in Market like you said. If that is the case I assume I can roll this one also to my Vanguard rollover IRA, right? 
Appears that is a SEP IRA, and according to https://www.irs.gov/pub/irs-tege/rollover_chart.pdf you do get to roll it over to a traditional IRA.

You are currently earning 0.03%/yr.  Not 3%, but 0.03%.  In other words, instead of earning $30/yr for every $1000 invested (that would be 3%), you get 30 cents/yr for every $1000 invested.

Investing your IRA money in a stock index fund will not guarantee ever-increasing values.  Some years your investment balance might decrease, maybe by a lot.  Given time, however, it is likely that you will do better on average than 0.03%.

DailyGrindFree

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Re: Advice on investments & question on moving accounts to Traditional IRA
« Reply #8 on: October 13, 2016, 04:42:14 PM »
It says my quarterly IRA statement. It sounds like IRA invested in Market like you said. If that is the case I assume I can roll this one also to my Vanguard rollover IRA, right? 
Appears that is a SEP IRA, and according to https://www.irs.gov/pub/irs-tege/rollover_chart.pdf you do get to roll it over to a traditional IRA.

You are currently earning 0.03%/yr.  Not 3%, but 0.03%.  In other words, instead of earning $30/yr for every $1000 invested (that would be 3%), you get 30 cents/yr for every $1000 invested.

Investing your IRA money in a stock index fund will not guarantee ever-increasing values.  Some years your investment balance might decrease, maybe by a lot.  Given time, however, it is likely that you will do better on average than 0.03%.

That is perfect. That means I can transfer all and combine them in my new Vanguard Traditional IRA account. Thanks for all the help.