401K Transfer to Traditional IRA
This is a two part question. I recently retired, and I have closed out my 401K. Fidelity wouldn’t do a direct rollover to my traditional IRA at the new institution (a credit union) as I had asked, and they advised me of the same when I called them. So they sent a check to my home address made out to my credit union with the next line being F.B.O. alongside my name.
I know I’m only allowed to have a check made out to me once per year, no matter how many IRA accounts I have. And of course I know I need to deposit that check into an IRA within 60 days.
But does this count as my only one check per year? Or is this different since it’s made out to my credit union and not only in my name? I keep getting different answers from each institution. Chances are I won’t need to do this again this year, but I want to be sure I don’t incur a tax liability.
Here is the second part of my question. Say my Fidelity 401K account (for which I’m now in possession of a check from that 401K account) was worth $10,000. Say I already have $30,000 in my traditional IRA at the credit union. The credit union will only allow me a single traditional IRA account (unlike where I bank which allows me multiple IRA accounts).
So if I mingle the funds from my 401K ($10,000) with the IRA balance that’s already in my account ($30,000), and if that is my one allowed indirect rollover (if it is indeed a indirect rollover), does that mean all of the funds that I mingle into my IRA account cannot be moved for the next year?
P.S. I’m not 72 1/2 yet.
Thank you Terry!
Terry Says
Whew — The simplest thing to do would be to contact Fidelity and tell them you want to give them back the check — don’t deposit it — and put it into an IRA rollover account. You can invest conservatively in their Equity/Income fund, or just leave it in their government securities money market fund.
That way you’ll avoid any taxes on the money. Once in your IRA rollover at Fidelity, you can take the money out — all or part of it — at any time, paying taxes on the withdrawal. They will withhold 15 or 20% for taxes when you do withdraw.
Stop fooling around with all these accounts and keep it simple. Do that immediately. Let them know you didn’t understand. They will be delighted to open the Rollover for you. Then remind them not to send you a 1099 tax form saying you took a withdrawal!
