A few random 401k / 403b / IRA questions

[tigeri]

I'm an intern and my wife is a nurse. She doesn't care to know anything about investing other than asking me to me to make it happen so that we have money some day when we want to retire.

She changed employers after a couple of months this year and left behind a 401k with about $1300 in it. For now we can leave it where it is (Fidelity). Since the account is so small I'm sure they will encourage her to take it somewhere else before too long. Her current employer offers a 403b and Roth 403b with a match or 457b with no match (TIAA). She is currently contributing to the Roth 403b enough to get the whole match (I think 7%+ 3%).

1) Should I leave the money alone until they encourage her to move it or go ahead and move it?

2) Can a 401k be rolled into a 403b?

3) I'm not exactly sure how it would complicate things to roll it into an IRA next year (or some year in the future), but would that be a better option? I'm guessing it would have to go into a traditional IRA. Then that would limit the Roth contributions she could make for that year.

4) We already have Roth IRAs that are almost maxed out for this year. Do Roth 403b contributions have any effect on how much one can contribute to Roth IRA (being otherwise Roth IRA eligible)?

Thanks in advance if you can answer any or all of my questions.

[DMFA]

1. $1,300 is pretty small.  You might just roll that into a Roth IRA and pay taxes on it.  You're probably in a low bracket, which means this is probably a good year to do it.

2. Depends on if your 403b provider allows in-service rollovers, but if they, do, then yes.  Specifics on 403b's in IRS pub 571 [Link].

3. See #1.

4. 403b's and IRAs are totally different.  One has no bearing on the other.  When you earn more ($183,000 MFJ or so), you won't be able to contribute directly to a Roth IRA.  In that instance, you do something called the "Backdoor Roth IRA" conversion [Link], which requires you to have $0 in non-Roth IRAs.

The income cap is only for IRAs; Roth 403b and 401k do not have an income cap (though they're probably not be great ideas if you're in a high bracket).

[tigeri]

Thanks for the info DMFA. I was having trouble finding direct answers anywhere. Just a couple of follow-ups...

5) If we roll the money into a Roth IRA does it have to be a new account? Or can it be rolled into her current Roth? And does that count toward her annual limit ($5,500) or is this a separate transaction?

6) The other reason I haven't rolled it yet is because the employer only contributes their match at the end of the year, so I don't want her to miss out on that ~$600. If I have to wait until after the first of the year to roll it over, can it be classified as 2016 contribution if I haven't filed my taxes or would it count as done in 2017?

[homanga]

A quick hi-jack of this post with a simple 401k question.

 

First year out in IC job. I have set up a solo 401k. Planning to max it out 18k+36k. Real question is do I have to file as a LLC/S-Corp or anything special as I have not formally set this up to this point just been getting paychecks directly under my name etc.

[jfoxcpacfp]

homanga wrote:

First year out in IC job. I have set up a solo 401k. Planning to max it out 18k+36k. Real question is do I have to file as a LLC/S-Corp or anything special as I have not formally set this up to this point just been getting paychecks directly under my name etc.

Click to expand...

Your max is $53k, not $54k. You can remain a SP (Sole Proprietor) and have a SOLO-k.

[jfoxcpacfp]

tigeri wrote:

I’m an intern and my wife is a nurse. She doesn’t care to know anything about investing other than asking me to me to make it happen so that we have money some day when we want to retire.

She changed employers after a couple of months this year and left behind a 401k with about $1300 in it. For now we can leave it where it is (Fidelity). Since the account is so small I’m sure they will encourage her to take it somewhere else before too long. Her current employer offers a 403b and Roth 403b with a match or 457b with no match (TIAA). She is currently contributing to the Roth 403b enough to get the whole match (I think 7%+ 3%).

1) Should I leave the money alone until they encourage her to move it or go ahead and move it?

2) Can a 401k be rolled into a 403b?

3) I’m not exactly sure how it would complicate things to roll it into an IRA next year (or some year in the future), but would that be a better option? I’m guessing it would have to go into a traditional IRA. Then that would limit the Roth contributions she could make for that year.

4) We already have Roth IRAs that are almost maxed out for this year. Do Roth 403b contributions have any effect on how much one can contribute to Roth IRA (being otherwise Roth IRA eligible)?

Thanks in advance if you can answer any or all of my questions.

Click to expand...

1. For accounts < $5k, they can move it w/o permission. Go ahead and take care of business


2. Yes, if the 403b allows.


3. See if the 403b allows incoming IRA r/o's so you don't mess up your back-door Roth OR roll directly into a Roth IRA (my choice).


4. No. The Roth 403b is an employer Roth, which is accounted for totally apart from the personal (individual) Roth.


5. It d/n/h to be a new account, but best to keep Roth conversions separate from Roths made up of original contributions b/c of the 5-year rule.


6. It will count as a 2017 r/o, not a contribution. Better b/c you get to wait another year to pay the taxes.

[DMFA]

tigeri wrote:

Thanks for the info DMFA. I was having trouble finding direct answers anywhere. Just a couple of follow-ups…

5) If we roll the money into a Roth IRA does it have to be a new account? Or can it be rolled into her current Roth? And does that count toward her annual limit ($5,500) or is this a separate transaction?

6) The other reason I haven’t rolled it yet is because the employer only contributes their match at the end of the year, so I don’t want her to miss out on that ~$600. If I have to wait until after the first of the year to roll it over, can it be classified as 2016 contribution if I haven’t filed my taxes or would it count as done in 2017?

Click to expand...

5. $5500 limit is on contributions, not rollovers/conversions.

6. Again, contributions and rollovers/conversions are different.  See Johanna's response above.

A lot of your IRA-based questions are answered in IRS pub 590-A [Link].