Author Topic: Schwab PCRA Account - Is it safe to mix Pre-tax & Roth funds?  (Read 443 times)

hpcaseyy

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Schwab PCRA Account - Is it safe to mix Pre-tax & Roth funds?
« on: September 04, 2021, 04:53:16 PM »
I'm fairly new to investing, and I've decided to take more control of my retirement accounts. I recently opened a Schwab PCRA ( self-directed brokerage option) for my 457 account with my employer. All withdrawals are processed through my 457 account, so before I place trade orders in the PCRA, I have to transfer funds from my 457 to the PCRA where the money is automatically invested in a Schwab Money Market Fund (sweep account).

Here's the thing, I have both Pre-tax and Roth contributions in my 457. Once my money is invested in the PCRA, I won't be able to distinguish between pre-tax and Roth money types. The Schwab representative said that the brokerage firm for the employer account (457) would keep track of the amount of Roth and Pre-tax funds that I transfered to the PCRA, so later on when I take distributions, they will determine how much was Roth and how much was Pre-tax based off of the original ratio of contributions that were transferred.

Does this seem right? Is it a bad idea to mix pre-tax and Roth funds in a PCRA account if I can't tell what they're invested in? My plan is to use the PCRA to invest in index funds like SWSTX and maybe some REITS index funds. If I mix pre-tax and Roth funds, should I stick to one index fund to keep things simple? Does anyone have any advice?


Steeze

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Re: Schwab PCRA Account - Is it safe to mix Pre-tax & Roth funds?
« Reply #1 on: September 04, 2021, 06:11:43 PM »
Sounds like a nightmare honestly, but hopefully your 457 provider is on top of the paperwork end.

My wife’s employer has fidelity 401k which has the “brokerage link” option. Same idea, sweep funds into a money market then invest in whatever you want. The brokerage link is separated into two different accounts though, one for Roth and one for pre-tax. She can contribute to (4) options: 401k, Roth 401k, brokerage link, or Roth Brokerage Link.

If you are worried about it you could use the PCRA for only one or the other so the accounting is more straightforward later. Maybe someone else with Schwab can offer better insight.

Rob_bob

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Re: Schwab PCRA Account - Is it safe to mix Pre-tax & Roth funds?
« Reply #2 on: September 05, 2021, 05:25:16 PM »
I would never mix the two, it would be a record keeping nightmare and if the 457 firm botched their record keeping, well.......