Transfer from brokerage account to Rollover IRA

[MrMoneySaver]

I have a brokerage account which I funded with proceeds of a house sale a couple of years ago. A couple days ago I sold out of a bond fund that had a loss. Now I want to transfer that money to a Rollover IRA that I've had for a while. I have two reasons: 1.) to help with 2023 taxes, as I wasn't able to fully fund my 401k at work, and 2.) to allow the money to grow tax-free.

Is this doable, viable, advisable? Are there any issues to look out for? Double taxation? Penalties?

Thanks in advance!

[MDM]

Have you made any IRA contributions for 2023 already?

Do you have Compensation that will allow you to make the contribution amount you desire?

[secondcor521]

The other issue to watch out for is that rollover IRAs are generally only eligible to be rolled into a future 401(k) if there are no other contributions.  Contributing to it could preclude that option, which may or may not be important to you.

You'd also need to be sure you're eligible to make the contribution.  Compensation as mentioned by MDM is one thing; your AGI and whether you're covered by a retirement plan at work can also impact whether you're eligible to take a deduction for the contribution.  If you're not eligible for the deduction, then you may want to consider a backdoor Roth instead.

[seattlecyclone]

The other issue to watch out for is that rollover IRAs are generally only eligible to be rolled into a future 401(k) if there are no other contributions.  Contributing to it could preclude that option, which may or may not be important to you.

This really does vary. There was a time when the only IRAs that could legally be rolled into 401(k)s were so-called "conduit IRAs" that consisted purely of funds rolled out from a previous workplace retirement account. Add more contributions to the account and it lost its "conduit" status. The law changed quite a few years ago to allow any pre-tax IRA balances to be rolled into 401(k)s, not just conduit IRAs. It's possible that your particular employer hasn't bothered to update their 401(k) plan rules since that law changed, but my sense is that most employers have no particular incentive to restrict non-conduit IRA funds from rolling in, and most of them have updated their plan to be as permissive as the law currently allows.

[secondcor521]

The other issue to watch out for is that rollover IRAs are generally only eligible to be rolled into a future 401(k) if there are no other contributions.  Contributing to it could preclude that option, which may or may not be important to you.

This really does vary. There was a time when the only IRAs that could legally be rolled into 401(k)s were so-called "conduit IRAs" that consisted purely of funds rolled out from a previous workplace retirement account. Add more contributions to the account and it lost its "conduit" status. The law changed quite a few years ago to allow any pre-tax IRA balances to be rolled into 401(k)s, not just conduit IRAs. It's possible that your particular employer hasn't bothered to update their 401(k) plan rules since that law changed, but my sense is that most employers have no particular incentive to restrict non-conduit IRA funds from rolling in, and most of them have updated their plan to be as permissive as the law currently allows.

Thanks for the correction and updated information!

[MrMoneySaver]

You'd also need to be sure you're eligible to make the contribution.  Compensation as mentioned by MDM is one thing; your AGI and whether you're covered by a retirement plan at work can also impact whether you're eligible to take a deduction for the contribution.

How could I determine this? I have a 401k at work but I only contributed about 10,000 to it in 2023. That's why I want to make this contribution.

[MDM]

You'd also need to be sure you're eligible to make the contribution.  Compensation as mentioned by MDM is one thing; your AGI and whether you're covered by a retirement plan at work can also impact whether you're eligible to take a deduction for the contribution.

How could I determine this? I have a 401k at work but I only contributed about 10,000 to it in 2023. That's why I want to make this contribution.

See IRA Deduction Limits.