Having Different Retirement Accounts

[Finchy63]

Hello,

Looking for some advice regarding holding different retirement accounts at one time.

My Wife:

- Has a dormant 401K from an old job.

Myself:

- Has a current 403(b) that I contribute to bi-weekly.

Questions:

1. Can both my wife and I open traditional IRA's each, and contribute the maximum $5,000 each.

2. If my wife rolls over her 401K to her new traditional IRA, does that have to be done prior to opening the IRA, or can she open one, contribute $5,000, then rollover her 401K funds without paying taxes on the rollover?

Any guidance would be greatly appreciated. We are looking to expand our retirement options and would like to open the IRA's prior to filing taxes.

About us: Married in late 20's, joint income of $75,000.

Thanks.

[jpg7n16]

Questions:

1. Can both my wife and I open traditional IRA's each, and contribute the maximum $5,000 each.

Yes. Though with traditional IRAs, there are 2 things to consider. 1) Contributing to the account and 2) deducting the contribution on your taxes.

You can always contribute to a traditional IRA. No matter how much you make. The real question is, can you deduct it? And based on what you've said, as long as you guys file joint returns, you would be able to deduct the entire $10k.

If you don't mind me asking, why are you guys doing traditional ones as opposed to Roth?

2. If my wife rolls over her 401K to her new traditional IRA, does that have to be done prior to opening the IRA, or can she open one, contribute $5,000, then rollover her 401K funds without paying taxes on the rollover?

Any guidance would be greatly appreciated. We are looking to expand our retirement options and would like to open the IRA's prior to filing taxes.

About us: Married in late 20's, joint income of $75,000.

Thanks.

Rolling over an account is not a taxable event and can be done at any time. And yes the account would need to be open before you can roll it over (otherwise, how would they know what account number to send the check to?)

The order of rollover/contribution is not important. However, making the contributions before April 17th is very important. If you are late on that piece, you can never go back. So I'd likely open the accounts, make your 2011 contributions, then request the rollover from your previous plans.

[Finchy63]

Hi Thanks for the reply.

Traditional v Roth:

Basically - we're not sure how we want to set things up 100%, but we do have a lot in savings, so thought that at the moment, we may as well get the return on 10K deductions with the 2 traditional IRA's.

We're used to paying taxes, so it's not a massive goal of ours to wait for 30 years and then not have to pay taxes on our ROTH distributions. Most of the calculations we have made seem to be fairly close between ROTH's v traditional.

Thanks for the info on the process re: rollover of 401K, that's our plan - open both IRA's prior to April 17th, then rollover then 401K.

Do you have any tips for solid IRA plans to go with?

Again, very helpful thank you so much.

[jpg7n16]

Given a joint gross income of $75k, you are very likely in the 15% bracket. Do you want to pay that rate? Or the rate in the future sometime?

I always recommend some balance between pretax and Roth money, so that you're good either way. I personally say to max your Roths for 2011 and keep the 401ks in Traditional accounts.


As far as good companies to have your IRAs with, I personally use Fidelity. There are also a lot of people here who use Vanguard.

Do you already have a brokerage firm that you like?

How do you plan on investing the funds in your accounts?

[ecoadapt]

There are many other retirement plans out there including SEP-IRAs, SIMPLE IRAs, solo 401(k) plans, annuities, and more. As a general rule of thumb, you can have multiple accounts for these as well. Keep in mind there may be eligibility, contribution, and income requirements associated with these types of accounts, so you should do a little more research before opening new accounts.

[kv968]

Do you have any tips for solid IRA plans to go with?

Again, very helpful thank you so much.

I personally use T Rowe Price but Fidelity and Vanguard are good choices also. Actually I'm thinking of opening another Roth account at a broker and/or Vanguard because I want to start buying individual stocks and possibly options (i.e broker) or some decent commission-free ETF's (i.e. Vanguard).

One thing to keep in mind when rolling over your wife's 401k is to make sure you do a DIRECT ROLLOVER into a traditional IRA and not get a check from the 401k. It may get a little messy if you get a check. Just call the company you decide to have your IRA with and they'll be able to take care of all of that for you.