Your Questions Answered: Does A 401k Rollover Put Me Over My Annual IRA Max?

Last year we advised a client to consider rolling over a 401k that they had with a former employer to their SIMPLE IRA with their current employer. Several weeks later, Chris sent us this e-mail. We have edited it to protect the privacy of the client:

I am having my old 401k rolled into my SIMPLE IRA account with (employer). I have already contributed the max into the SIMPLE IRA for 2023. Will the rollover cause any issues since my 2023 contributions have been maxed out for 2023?

Our answer was that rollovers and transfers do not count as contributions, so he is completely safe. That was the short answer, but not the only issue he has to consider.

Another issue is the two-year rule. This rule states that a participant CAN roll over a 401k into a SIMPLE IRA if the individual has participated in the SIMPLE IRA for at least two years. The two-year clock starts from when the first contribution was made into the SIMPLE. The SIMPLE must be funded for at least two years before you may transfer assets to or from a non-SIMPLE IRA or roll assets to or from any other retirement account.

So, our client was safe on both points. But, as always, we recommend you consult your trusted tax advisor on whether this type of transaction would be advisable for you.



Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/ SIPC.