Should I Rollover a 401k Balance to an Existing or a New Account?

Choose the account that's right for you.

Rollover to an Existing IRA

Rolling 401k assets to an existing IRA allows you to keep all assets in one place. You can typically also roll the assets out again to a future employer plan. However, IRC 408(a)(5) implies that the assets should not be "commingled" as the 401k assets then lose their "conduit status." In other words, while IRS regulations generally permit commingling, some employers may prohibit the rollover of the IRA assets into their plan.

Rollover to a New IRA

Rolling over to a new account will keep your 401k assets separate from any existing IRA assets. Should you later decide to place the assets into a future employer plan, you may wish to consider this option.

Bottom Line

If you do not intend to roll the assets to a future employer plan, combining the assets into an existing account is the most convenient choice. For more information, consult a tax adviser or the IRS.

References

• Appleby Retirement Dictionary: Commingling
• IRS: Individual Retirement Accounts