Author Topic: Annoying retirement account mistake  (Read 4614 times)

joer1212

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Annoying retirement account mistake
« on: May 14, 2012, 07:03:08 PM »
I just found out that I made a mistake in my employee retirement plans. I mistakenly contributed to 3 types of plans instead of 2-- a 457b, a ROTH 401k and a regular 401k.
I only wanted to contribute money to the 457b and ROTH 401k.
Now, I have $1,306 in an extra account I didn't want (regular 401k).
Will I now receive 3 separate checks from my 3 accounts when I retire? This is a pain in the neck, because I now have to keep track of 3 accounts, each of which is treated differently by the IRS. And, to have this extra headache for such a small amount of money is really annoying, especially for a guy like me who is always looking to streamline and simplify things.
I was hoping I could consolidate accounts by rolling money from my regular 401k into my 457b or ROTH 401k, but I can't.
Is there anything else I can do to simplify things short of just liquidating the 401k account now, and getting hit over the head with a 10% penalty?
What really annoys me is why on earth would a company that offers a 457b plan also offer a regular 401k plan??? What's the point? They're the same thing, except the 457b is better, since you don't get a 10% tax penalty if you withdraw the money early. I would have never made the mistake I did if this was never offered to begin with.
To complicate matters more, I plan on retiring at around age 50, and I will use the IRS 72 (t) rule to avoid paying a 10% tax penalty for early withdrawals from my accounts.
Now that my accounts are so fragmented, it will get even dicier and more complicated to use this rule to my advantage.
Should I take a small percentage from all 3 accounts simultaneously? Can I?
Or, should I take the majority of the money from this 401k (assuming it grows to a few thousand in 10 years), so I will liquidate this account first? How can I simplify things?
« Last Edit: May 14, 2012, 07:05:59 PM by joer1212 »

James

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Re: Annoying retirement account mistake
« Reply #1 on: May 14, 2012, 07:25:17 PM »
I don't have any great advice, sounds like the only real option is to liquidate it and pay the couple hundred bucks in penalty and taxes.


I will agree that multiple retirement accounts get to be a real pain.  I have a total of 9 retirement accounts.  I have two regular Roth IRA, a rollover IRA, a 403b that needs to be rolled over into the rollover IRA, a 401k at my current job along with a Roth 401k and their ERP plan account.  Finally I have two whole life accounts that are in the market also.  Trying to keep them correctly allocated is a real pain in the ass.  At best I can only get it down to 8 accounts.

Lars

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Re: Annoying retirement account mistake
« Reply #2 on: May 15, 2012, 08:58:03 AM »
Are you sure you made a mistake Joer1212? My understanding is that the employer match for Roth 401K goes into a pretax account and not into the Roth 401k account. Perhaps your employer only offers the option of depositing its match into a 401k account.

James

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Re: Annoying retirement account mistake
« Reply #3 on: May 15, 2012, 10:28:52 AM »
Are you sure you made a mistake Joer1212? My understanding is that the employer match for Roth 401K goes into a pretax account and not into the Roth 401k account. Perhaps your employer only offers the option of depositing its match into a 401k account.

I didn't think about that, good point, I bet you are correct. 

joer1212

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Re: Annoying retirement account mistake
« Reply #4 on: May 15, 2012, 02:51:39 PM »
Another mistake I just made was not realizing that I can contribute 17k a year to my 457b; 17k a year to my Roth 401k, and 17k a year to my regular 401k.
This being the case, I will probably now max out my 457b and regular 401k, and anything that is left over I will put into the Roth 401k.
I am thrilled to learn that I can shelter $34,000 a year from taxes until I retire.
I previously thought that I can only contribute $17,000 a year into my deferred accounts.

James

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Re: Annoying retirement account mistake
« Reply #5 on: May 15, 2012, 03:02:10 PM »
Another mistake I just made was not realizing that I can contribute 17k a year to my 457b; 17k a year to my Roth 401k, and 17k a year to my regular 401k.
This being the case, I will probably now max out my 457b and regular 401k, and anything that is left over I will put into the Roth 401k.
I am thrilled to learn that I can shelter $34,000 a year from taxes until I retire.
I previously thought that I can only contribute $17,000 a year into my deferred accounts.

Sorry, your info is wrong on the Roth 401k and regular 401k limits, it's a combined $17,000...  I don't know about the 457b...

joer1212

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Re: Annoying retirement account mistake
« Reply #6 on: May 15, 2012, 03:35:57 PM »
Yes, I just looked into this and realized my info was wrong.
But, that's OK. All I originally wanted was to defer as much money in taxes as possible from my paycheck. I previously thought that I can only contribute $17,000 a year into my deferred accounts. That's the only reason I put the other 17k into the Roth to begin with.

Ben

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Re: Annoying retirement account mistake
« Reply #7 on: May 22, 2012, 08:52:10 AM »
I believe Lars is correct. The regular 401k is likely your employer contributions (you don't get a tax-free match when you make a Roth contribution). Even if you were able to empty it (with penalties) today, it would immediately start filling up again. I would go ahead and get used to the added complexity...