Retirement Plan Rollovers Have you Confused? Check Out this Rollover Compatibility Chart
Have you ever wondered, “Hmmm… can I roll this retirement plan over to that retirement plan”?
Retirement plan rollovers can be confusing. Sometimes there are goofy rules around when you can do it or if you can do it at all. And if you’re not careful, a rollover from a pre-tax plan to post-tax (Roth) could have serious tax implications that you did not intend for.
Don’t let the complexity and depth of options (which are ultimately a good thing) scare you off. It is worth getting beyond the initial hesitation from the complexity because rolling over plans can really benefit you. Potential benefits include:
- lower account fees and administrative costs
- more and better investment options
- less time for upkeep
- consolidation allows you to more easily determine allocation
- less trading costs and work to re-allocate
With all these retirement plan options available, I thought it might be helpful to compile a table that shows what plans you can roll from (left column) and in to (top row). Use this as a quick reference only – not a replacement for tax professional consultation. And always double-check with the IRS.
|Roth IRA||Other Roth||Trad. IRA||SEP IRA||SIMPLE IRA||Qualified Plan||403b||457b|
|Other Roth (401k, 457b, 403b)||Y||Y (if trustee to trustee)||N||N||N||N||N||N|
|Traditional IRA||Y (taxed as income)||N||Y||Y||N||Y||Y||Y (separate account)|
|SEP IRA||Y (taxed as income)||N||Y||Y||N||Y||Y||Y (separate account)|
|SIMPLE IRA||Y (after 2 years, taxed as income)||N||Y (after 2 years)||Y (after 2 years)||Y||Y (after 2 years)||Y (after 2 years)||Y (after 2 years, separate account)|
|Qualified Plan (401k, defined benefit)||Y (taxed as income)||Y (taxed as income, in-plan)||Y||Y||N||Y||Y||Y (separate account)|
|403b||Y (taxed as income, in-plan)||Y (taxed as income, in-plan)||Y||Y||N||Y||Y||Y (separate account)|
|457b||Y (taxed as income, in-plan)||Y (taxed as income, in-plan)||Y||Y||N||Y||Y||Y (separate account)|
A few things to note:
- the SIMPLE IRA typically has a rule around being open for two years before you can do a tax-free rollover (not sure why, seems kind of arbitrary).
- if I noted “taxed as income”, this means that any amount you roll over (from pre to post tax) is considered as income and could increase your tax liability.
- Rollovers in to a government 457b are possible for some accounts, but require separate accounts.