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I've seen from this site that 401(k) rollovers don't count against the yearly IRA contribution. I've also seen many resources saying that I should open a "rollover IRA" account, to transfer my old 401(k) to an IRA.

Why can't I just roll the 401(k) over to my existing traditional IRA (I've already contributed my yearly max to an IRA)?

  • Who is your existing traditional IRA with? Have you asked them if you can roll 401(k) funds into your existing IRA? – Ben Miller Jul 8 '17 at 18:18
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    @BenMiller - Why wouldn't I be able to? – horse hair Jul 8 '17 at 18:26
  • I think you can, assuming that your IRA custodian has the capability of accepting rollover funds. What makes you think you can't? – Ben Miller Jul 8 '17 at 18:28
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    I think the "open a rollover IRA" advice may be directed to people who don't already have an IRA, and whose past employer(s) won't let them remain on the company 401k. Then too, I don't like having all my eggs in one basket, so I have "regular" IRA (that is, all the money is from my IRA contributions) with one company, IRA rolled over from 401k with a different one. – jamesqf Jul 8 '17 at 18:48
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A long time ago, in a galaxy far far away, Rollover IRAs were used for funds that came from (were rolled over from) a 401(k) account or a 403(b) account. All that money (including any earnings in the interim) could be rolled over into a 401(k) plan with a new employer etc. One could make a regular contribution to a Rollover IRA but once such a commingling of money occurred, none of the money in the Rollover IRA could be rolled over into a 401(k) account etc. In those good old days when contributions to IRAs were made by paper check and "deposit slip", one had to write a letter to the Rollover IRA custodian certifying that the IRA owner understood that the contribution would destroy forever the possibility of rolling over the money into another 401(k) etc.

All this went by the wayside a few years ago when the law changed and the distinction between Rollover IRAs and ordinary Traditional IRAs was eliminated. Commingling of IRA contributions and Rollover money from 401(k)s are permitted, and the entire IRA balance could be rolled over into a new 401(k) plan (provided the new plan accepted rollovers). However the adjectives still persist; like chili555, I too have IRAs that are still called Rollover IRA, they all have commingled funds, and if the law ever changes back, none of those IRA accounts would be eligible for rolling over into a new 401(k).

  • But I believe that some 401(k) plans still will only accept rollovers from Traditional IRA where the money came from 401(k)s, even if there is no legal requirement to have such a restriction. – user102008 Jul 9 '17 at 4:17
  • +1 for the history and details. You can roll back my edit if you'd like. – JoeTaxpayer Jul 9 '17 at 14:06
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    @JoeTaxpayer I will defer to your superior memory of the opening sequence of the original Star Wars movie. :-) – Dilip Sarwate Jul 9 '17 at 14:10
  • I want to roll the 401(k) into the traditional IRA (which already exists, and I've already made my yearly contribution). Is that still ok? – horse hair Jul 10 '17 at 15:00
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    @horsehair Yes, you can roll over the 401(k) into the existing Traditional IRA. Start the process with your IRA custodian; they have all the necessary information and will gladly handle all the details. It might be that the 401(k) plan will send you a check payable to the custodian of your IRA which you will then have to mail to the IRA custodian, but that is a minor twist. DO NOT start with the 401(k) administrator; they will drag their feet and will likely screw up the process. And YES, rollovers are not contributions and so the previous contribution is irrelevant. – Dilip Sarwate Jul 10 '17 at 15:16
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You are right; Rollover is a process, and not an account type; the result is a Traditional IRA. There is no such thing as a 'Rollover IRA Account'.

Rolling a 401(k) over to a Traditional IRA makes sense if a) you have to, because you leave the employer the 401(k) is with; b) because you Traditional IRA is cheaper or more flexible or in other ways 'better' for you, or c) if your next step is a backdoor rollover to a Roth IRA.
Most of the time, it doesn't make sense, because employer 401(k) are often better and cheaper. Of course, for the investment company where you roll it too, it makes a lot of sense, because they get your money, so they recommend it. But that's only good for them, not for you.

Of course you can roll into an existing account, if you want to roll. Making a new account has no advantage.
I cannot imagine any IRA custodian wouldn't take rollovers; they would shoot themselves in the foot by that. What can happen - and you should consider this - that your IRA only accepts cash, and does not allow to transfer the shares you have in the 401(k). That means you have to sell and then re-buy, and you might lose a lot in fees there.

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    My account at Fidelity is called, by them, Rollover IRA. It is no different than a traditional IRA. – chili555 Jul 9 '17 at 1:31
  • See Dilip's answer. It was an account type. – JoeTaxpayer Jul 9 '17 at 15:13

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