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I participated in my company's 401K plan for my length of employment as they offered a match program. Now, with the company being bought out, I no longer qualify for the new company's 401K plan due to my younger age – they require participants to be at least 21 years old.

I am reading around the site that an IRA is my best option however, I was wondering how that would affect me down the road? Eventually when I qualify I would like to participate in my company's match program again. At that point would I roll my IRA back into the 401K? Can I have an IRA and 401K simultaneously, and is that even a good idea?

Any insight as to what my future would look like if I roll it into an IRA now, then want to participate in the 401K later would be great. Thanks!

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    I have never seen or heard of a company limiting 401K participation by age. Or are they just limiting the match? They didn't grandfather everybody in? – mhoran_psprep Jan 26 '12 at 14:01
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    Unfortunately not. Since I'm under 21 they won't let me participate or contribute at all. I'm rather displeased. – bradenkeith Jan 26 '12 at 14:11
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    @bradenkeith If you're displeased, it might help to express that to your superiors. Perhaps you could suggest that the new company "grandfather" existing under-21 participants into the 401(k) plan (i.e. make an exception for you and those like you), while keeping the age 21 restriction in place for new hires? That's a reasonable compromise, IMHO, that should keep all parties happy. – Chris W. Rea Jan 26 '12 at 15:34
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    That's legal?! I'm surprised. – Jason S Jan 26 '12 at 16:35
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    Huh. I guess they are allowed to exclude people under age 21: irs.gov/retirement/article/0,,id=119625,00.html – Jason S Jan 26 '12 at 16:56
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It depends how you do it.

If you roll it from your 401k directly to a Roth then you will have to pay the taxes. The contributions to the 401k are tax deferred. Meaning you do not owe taxes on the money until you collect it. Roth contributions are post tax but the gains are not taxed so long as they are disbursed under acceptable conditions according to the regulations.

If you roll it directly from the 401k to a regular tax deferred IRA you should be able to do that with out penalties or taxes. You will still have to pay the taxes at disbursement.

If you have the money disbursed to you directly then you will have to pay the penalties, fees, and taxes. Your contributions to an IRA will then be subject to limitations based on the IRA. It will literally be exactly like you are taking money from your pocket to invest in the IRA.

Your company should give you the option of a rollover check. This check will be made out to you but it will not be able to be deposited in a regular account or cashed. It will only be redeemable for deposit into a retirement account that meets the regulatory requirements of the 401k rollover criteria. I believe the check I received a few years ago was only good for 60 days. I recall that after 60 days that check was void and I would receive a standard disbursement and would be subject to fees and penalties. I am not sure if that was the policy of T.Rowe Price or if that is part of the regulation.

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The general advise is to contribute to the 401K up to the match limit. Then put money into a Roth IRA. Then put the rest into the 401K above the match.

Yes you can have an IRA and a 401K. You can even have Roth and non-Roth versions. You do have to watch the limits, and exclusions, but there is nothing stopping you from contributing to multiple types in one year. Over a long career you may find your self with all the possible types of accounts.

When you re-qualify for the company 401K, there is no need to roll over the IRA money into the 401K. Just keep the IRA.

  • From my understanding a Roth IRA incurs a tax penalty to roll into at this point. Are you suggesting I roll into an IRA then start a separate Roth to contribute to, roll into a Roth IRA, or roll into an IRA and contribute to the IRA? – bradenkeith Jan 26 '12 at 14:12
  • There is no need to roll anything. You have money in a 401K, keep it there (pick some of the investment options in your plan). Establish an IRA or Roth IRA at your Credit Union, bank, or one of the big mutual funds companies. When you are able to rejoin the 401K, start putting some money in the 401K. No need to roll any money over. – mhoran_psprep Jan 26 '12 at 14:18
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    In that case (which i never encountered before) roll it over into a Roll over IRA. Don't bother rolling it back when you become eligible, there is no guarantee they will allow it. – mhoran_psprep Jan 26 '12 at 14:35
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    @bradenkeith - You will have to pay the taxes on the money you are putting into the roth but there is no penalty for rolling it into the Roth. – user4127 Jan 26 '12 at 14:45
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    @bradenkeith If you have the money directly rolled over to the IRA company there is no penalty. If you convert the funds to a Roth there will be taxes. – mhoran_psprep Jan 26 '12 at 19:30

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