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Type of IRA - Simple vs Traditional vs Rollover

VintageFreakVintageFreak
in Fund Discussions
So I've transferred 401ks to IRAs, but never transferred IRA across brokers.

I went to initiate an IRA transfer at Schwab. First question it asks is "Select Type of Account". In the options provided I see few with "IRA" in them. Now I know we don't have any Roth IRAs.

I know my IRA used to be one/more 401ks. I consolidated into IRA at Scottrade.

I know my wife's was contribution AFTER taxes. This was before Roth IRAs existed and I didn't even have half a brain. I thought I was a genius and because my wife's income was below threshold she was eligible to contribute to an IRA and I decide investing in Firsthand Technology Fund and Bjurman Micro Cap fund was a fantastic idea. I had subsequently rolled each IRAs I had held directly with those fund companies into Scottrade IRA.

I also have a TRowePrice IRA which is also was a 401k previously. TRowePrice calls it Rollover IRA. Only mentioning because trying to make sense WTF is what kind of IRA.

So right now I need to transfer my Scottrade, now TDA IRAs to Schwab. What Account Type do I pick?

Comments

  • msf
    Forget about SIMPLE and SARSEP - those are employer-sponsored IRAs.

    Pretax or post-tax, you made it clear that the money you have is in traditional IRAs, not Roths. You keep track of that with 8606 forms.

    Rollover IRAs are something of a hack. They're just traditional IRAs containing money that originally came from an employer plan. They are there to help trace where the money came from.

    This used to be a big deal because your new employer's 401K plan might only accept money that originally came from another 401k plan, not a "regular" IRA. (If you were born before 1937 there were also tax benefits.) It's less important now.

    Currently, the main reason to "tag" money as coming from an employer plan is that in bankruptcy court, you get unlimited protection for 401k money and money that originally came from 401(k)s. Keeping this money segregated, with or without tag, "will facilitate the ease of tracking and proving which IRA assets are attributable to protected rollover contributions and growth thereon."
    Kitces, Credit Protection for Retirement Accounts.

    Aside from helping you know which money came from 401k's if you ever go through bankruptcy, the "Rollover" moniker doesn't serve much useful purpose any more. It's just a "traditional" IRA.

    Here's an Ed Slott forum post that says all of this more clearly and concisely:
    https://www.irahelp.com/forum-post/18141-traditional-ira-vs-rollover-ira
  • VintageFreakVintageFreak
    @msf - much obliged.
  • beebee
    Recent M* article on "2 Ways to Upgrade Your 401(k) Without Leaving Your Job"
    employees may not have to wait until they retire or leave the firm to be able to make improvements to their 401(k)s. If their plans offer what's called an "in-service distribution," they can move a portion of their money from the company retirement plan to an IRA even as they remain with the same employer. Additionally, some company retirement plans offer an "in-plan conversion," which gives employees the chance to convert traditional 401(k) assets to Roth 401(k) assets within the confines of the same plan.
    https://morningstar.com/articles/861732/2-ways-to-upgrade-your-401k-without-leaving-your-j.html
  • Sven
    @msf, thanks the explanation and references.
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