Should I Put My IRAs Into My Company’s 401(k)?

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If you person investments successful 1 aliases much Individual Retirement Accounts (IRAs) and are starting a caller occupation pinch an employer that offers a 401(k) plan, you whitethorn beryllium wondering: Should you move your assets from your IRA into your caller 401(k)?

Though nan mobility is simply a logical one, it seldom arises because IRA rollovers mostly move successful nan other direction, pinch investors transferring their 401(k) assets to an IRA erstwhile they time off a job. Nevertheless, location tin beryllium immoderate bully reasons to move your IRA(s) into your company’s 401(k).

Let's look astatine nan pros and cons of this maneuver.

Key Takeaways

  • Moving investments from an IRA to a 401(k) is called a reverse rollover.
  • Though uncommon, location are advantages to this move, including protection against creditors and delayed required minimum distributions (RMDs).
  • The disadvantage of doing this is that astir 401(k) plans person much constricted finance options than IRAs do.

Understanding Reverse IRA Rollovers

Moving assets from an IRA to a 401(k) is sometimes referred to arsenic a reverse rollover. That’s because nan rollover successful nan other direction—from a 401(k) to an IRA—is acold much common. This often happens erstwhile an worker leaves a occupation aliases decides they would for illustration much finance options than a firm 401(k) offers. 

However, it’s important to cheque whether your employer’s 401(k) accepts this benignant of incoming transfer. Some plans do, but others do not. The Internal Revenue Service (IRS) provides guidance arsenic to what kinds of transfers are allowed and really to study them.

As this guidance states, you are only allowed 1 rollover successful a 12-month period, and you must study immoderate transaction erstwhile you taxable your yearly taxation return for some nonstop and indirect rollovers. If you move assets retired of your IRA and into your 401(k) aliases usage them for different purpose, your IRA brokerage will nonstop you a Form 1099-R that will show really overmuch money you took out. On your 1040 taxation return, study nan magnitude connected nan statement branded IRA Distributions. The taxable magnitude you grounds should beryllium $0. Select “rollover.“

Though this maneuver is uncommon, it tin person advantages successful immoderate circumstances. 

Advantages of Rolling Over an IRA to a 401(k)

There are a number of reasons why you would want to move assets from your IRA into your 401(k):

  • Earlier Access to Your Money. IRAs and 401(k)s person different rules for erstwhile you tin return distributions. You tin typically commencement withdrawing from a 401(k) astatine 55 but will request to hold until you are 59½ to entree nan money successful your IRA. If you scheme connected retiring early, this astir five-year quality could beryllium important.
  • Lower Costs. Most 401(k) plans person administrative and different costs that make their disbursal ratios higher than those of IRAs. However, immoderate 401(k) plans—particularly those astatine ample companies pinch galore participants—might really person little fees than your IRA does. This is particularly existent if you usage target-date funds.
  • Protection Against Creditors. The assets successful 401(k) plans are much protected against creditors than those successful IRAs. IRA assets are protected successful bankruptcy up to a definite amount, but 401(k) plans person nary specified limits.
  • 401(k) Loans. Borrowing from your 401(k) should beryllium a past resort, but if you are really stuck for cash, it’s important to admit that immoderate 401(k) plans let loans. Loans are not permitted for IRAs, truthful moving your assets into your 401(k) mightiness make them much accessible successful an emergency.

Moving investments from an IRA to a 401(k) relationship mightiness springiness you much elasticity erstwhile it comes to accessing this money. However, it whitethorn good limit your finance options, because galore institution 401(k) plans are comparatively constricted successful nan options they offer.

Disadvantages of Rolling Over an IRA to a 401(k)

As pinch each finance decision, location are besides immoderate imaginable drawbacks to moving your IRA assets into a 401(k):

  • Limited Investment Options. One of nan advantages of an IRA is that you tin put successful astir anything. But 401(k) accounts, successful contrast, are often overmuch much limited. Some institution 401(k) accounts only let you to put successful a fewer communal funds, for instance, aliases promote you to put successful institution stock.
  • Low-Cost Investment Advice. Many IRAs supply assistance pinch finance selection—as agelong arsenic you don’t mind moving pinch a robo-advisor. A financial advisor tin besides thief you negociate investments successful a 401(k), of course, but this could beryllium of constricted usage considering nan small, curated finance action that's emblematic of a 401(k).

Can I Put My IRAs Into My Company’s 401(k)?

Yes. This is sometimes referred to arsenic a reverse rollover because it’s much communal to move costs nan different way, from a 401(k) to an IRA. The IRS provides guidance astir really to study these transfers.

How Do I Report an IRA Rollover?

Your IRA brokerage will nonstop you a Form 1099-R that will show really overmuch money you took retired of your IRA. On your 1040 taxation return, study nan magnitude connected nan statement branded IRA Distributions. The taxable magnitude you grounds should beryllium $0. Choose "rollover."

Why Should I Put My IRAs Into My Company’s 401(k)?

Rolling complete your IRAs into your company's 401(k) mightiness springiness you much elasticity erstwhile it comes to accessing this money, because 401(k) accounts let you to return distributions earlier than IRAs. 401(k)s besides supply much protection against creditors, and immoderate connection loans.

The Bottom Line

If you are starting a caller occupation pinch an employer that offers a 401(k) plan, you mightiness beryllium wondering if you tin rotation complete investments from your IRA(s) to your caller plan. Though unusual, this move tin connection immoderate advantages, specified arsenic accessing your status costs earlier or, successful uncommon instances, applying for a 401(k) loan. The disadvantage is that 401(k) accounts mostly person overmuch much constricted finance options than IRAs do.

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