Multiple IRA accounts: Roth and Traditional

Forum|Forum|3 years ago
July 4, 2022
2 replies
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Hi, here is the situation: I'm over 59 1/2, employed and have Roth IRA because I can not contribute to Traditional IRA. Also I have a 401k. My plan is to open Traditional IRA and roll over limited funds from 401k for some small trading. But continue to make contributions to Roth IRA only, as before.

Questions:

*Is this OK with IRS?

*I'd think with rollover to my new Traditional IRA there is no tax penalty?

*If I trade in the traditional IRA, hope with realized profit, taxes will be deferred until distributions are taken?

VolvoGirl

Employee

All yes. You will get a 1099R for the rollover to the Traditional IRA, but it won't be taxable. Does your 401K let you do a rollover? Yes you can have profits or loss in the IRA and it is deferred until you take it out. But then the distribution is taxed as ordinary income and you don't get capital gains tax rate on it.

AlexVrAuthor

Thank you

Opus 17

Employee

You may find your workplace 401(k) won't allow you to remove funds while you are still employed with the plan sponsor. That would be their rule, not an IRS rule. If your employer's plan does allow rollovers while you are still employed, your plan is fine. (Or if you have a plan from a former employer that you are separated from, a rollover is definitely allowed.)