Can I have both, 401K plan and IRA?

Question

Currently I have 401K plans with 3 different companies. One where I work at right now, and two other at my previous jobs. I would like the plans from my previous jobs to be in one place, so I want to create an IRA and rollover the money from 2 of my previous jobs 401K plans to that IRA. But the 401K at my current job I want to keep as it is since I get to put away more money and I get employer contributions.

Can I do that? Have both 401K and IRA? What are the advantages and drawbacks (if any)? What should my next step be?

Answer 1

Here is the answer.

A 401k plan is an employer managed retirement plan.  Every contribution is placed within a tax deferred account.  Within this account you are provided with investment options, usually mutual funds, bond funds, stock funds and possible company stock.  You can adjust your investment contributions at any time.

A IRA is an Individual Retirement Account.  Meaning, that there is no company that is chosen for you.  You can open the account with any investment company of your choice, and choose the investments to be used within the account.  This too is a tax deferred account.

The drawbacks of having multiple tax deferred accounts, is that you are duplicating the taxation of your monies.  Meaning, that each account is going to require mandatory distributions at age 70 1/2.  In addition, you could be possibly duplicating your diversification of the monies.  This at times works against you.

So any time that you are investing, it's best to look at your entire portfolio and develop a strategy.  Even though they are in two different accounts.

Hope that explains it.

  

Answer 2

Yes you can

Answer 3

Rolling over the money from your former employers' 401(k) plans into an IRA will give you more control over the money. With an IRA, you can pick any investments you want (as opposed to being limited to just the offerings in your 401(k) plans). Consider Vanguard for its low fees (especially its index funds, which track major market indexes).

Make sure you open the IRA first then roll the 401(k) money directly into the IRA (don't have a check made to you).

You can make contributions to both your 401(k) and IRA. And if your income doesn't exceed certain limits, you'll get a tax write-off for your IRA contribution. See http://www.kiplinger.com/columns/ask/arc...

Answer 4

You can, you'll need to roll it over to your 401 or start an IRA and then roll it over.  You will need to contact the reps at both 401s that you want to rollover and get the proper paper work.  Your HR should be able to help you as well.  

Advantages with IRA is that you'll have a wider range of what you can invest in.  Not sure what the tax implications are.  

Answer 5

You can do that.  You need to choose a company to handle your 401k rollover.  Google it.