What is a reverse rollover, and why might you roll an IRA into a 401(k) or 403(b) account?

The term refers to moving money in a way that’s different from what happens most frequently. At some point, people often move money out of their workplace retirement plans—and into an IRA that they control. There are pros and cons of doing that, and of course, you want to review your options carefully before making any moves.

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But there may be good reasons for moving money in the opposite direction: From an IRA to your 401(k) or similar plan. When you do that, you can potentially eliminate pre-tax IRA balances, which could help you manage RMDs (by postponing them, at least) or do backdoor Roth conversions.

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There may be other reasons for reverse rollovers, as well. For instance, maybe you’re going to leave a job after age 55 but before age 59.5 and you want to use the so-called Rule of 55.

More information:
Pros and cons of rolling to a 401(k):
Roth conversions, backdoor Roth, and mega-backdoor Roth:

As with any decision, this requires careful analysis, and you want to examine the pros and cons carefully with a tax advisor, attorney, and financial planner who are familiar with the details of your situation. It may make sense to use this strategy, or it might be one to skip.

Make sure to look at the big picture as you weigh the advantages and disadvantages. For example, it’s important to know if you have a quality workplace plan with reasonable fees and good investment options. If you don’t, that makes any tax management strategies a bit less appealing. But still, the approach could make sense.

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CHAPTERS:
00:00 Like a Rollover, But Different
00:25 What Is a Reverse Rollover?
01:28 Postpone RMDs While Working (If Allowed)
02:37 Penalty Free Withdrawals At 55 (If Eligible)
03:50 Enable Backdoor Roth
05:49 Better Investment Options?
06:54 Bigger Loans Available?
07:52 Creditor Protection
09:09 Getting the Money Out of Your 401(k)
10:02 Moving Money From the IRA
10:55 Are Roll-Ins Even Allowed?
11:16 Less Control Over Investments, Fees, Etc.
12:24 Pre-Tax Money Only?
12:48 Annual Contribution Limits

IMPORTANT:
It’s impossible to cover everything you need to know in a video like this. The only thing that’s certain is that you need more information than this. Always consult with a CPA before making decisions or filing a tax return. This is general information and entertainment, and is not created with any knowledge of your circumstances. As a result, you need to speak with your own tax, legal, and financial professional who is familiar with your details. This video is not a substitute for individualized, personal advice. Please verify with your plan administrator when employer plans are involved. This information may have errors or omissions, may be outdated, or may not be applicable to your situation. Investments are not bank guaranteed and may lose money. Opinions expressed are as of the date of the recording and are subject to change. “Likes” should not be considered a positive reflection of the investment advisory services offered by Approach Financial, Inc. The Comments section contains opinions that are not the opinions of Approach Financial, Inc., and you should view all comments with skepticism. Approach Financial, Inc. is registered as an investment adviser in the state of Colorado and is licensed to do business in any state where registered or otherwise exempt from registration….(read more)

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A reverse rollover is a type of financial transaction in which an individual or business transfers funds from one retirement account to another. The process is similar to a traditional rollover, but in reverse. The primary benefit of a reverse rollover is that it can help individuals or businesses save on taxes and fees associated with retirement accounts.

The process of a reverse rollover begins with the individual or business transferring funds from one retirement account to another. This is typically done through a financial institution or broker. The funds are then held in a new account, which is typically a non-taxable account such as a Roth IRA.

Once the funds are transferred, the individual or business can then withdraw the funds from the new account. This withdrawal is typically tax-free, as long as the funds are used for qualified expenses such as education costs or medical expenses. In some cases, the funds may be subject to taxes if they are withdrawn for non-qualified expenses.

When the funds are withdrawn from the new account, it is important to note that the individual or business will be responsible for any taxes and fees associated with the withdrawal. It is also important to note that the funds cannot be returned to the original account, as this would be considered a taxable event.

Reverse rollovers can be beneficial for individuals or businesses who want to save on taxes and fees associated with retirement accounts. However, it is important to understand the process and any associated taxes and fees before engaging in a reverse rollover.