IRAs, Roth IRAs and 401(k) Retirement Savings Plans- Part II of a II Part Article

For Part I of this article please see IRAs, Roth IRAs and 401 (k) Retirement Saving Accounts-Part I

(3/30/08)- The question often arises as to whether or not an individual can continue to contribute to his/her 401 (k) retirement plan even after attaining the age of 70 1/2. Unlike the regular IRA, where an individual must start withdrawing a minimum amount each year upon attaining the age of 70 1/2, an individual can continue to make contributions to their 401(k) plan as long as they want to do same.

This is true even if you are taking a withdrawal from a 401(k) plan with another employer. On the other hand you can continue to contribute to a Roth IRA even after you attain the age of 70 1/2.

(1/14/08)- Most of us are familiar with the fact that the designated beneficiary of an IRA or Roth IRA plan can roll over that account into an IRA survivor or Roth survivor account.

In doing this type of rollover option, the beneficiary can lower the tax bite, as well as receive a steady stream of income over a number of years, instead of taking the lump-sum distribution option. In going this route, the beneficiary saves himself/herself from being hit with an immediate substantial tax bill.

Under current rules incidentally you can convert a regular IRA to a Roth IRA if your modified adjusted income is no more than $100,000 a year. Starting in 2010, there is no income limitation.

The tax bite for conversions that take place in 2010 can be spread out over a two-year period of time. Please keep in mind that there is a substantial tax bite involved when a person converts a regular IRA to a Roth IRA.

What are the options for the beneficiary of a 401(k) plan? A federal pension law enacted two years ago made it possible for both spousal and non-spousal beneficiaries to roll inherited 401(k) plan assets into a survival IRA account without having to pay immediate lump sum taxes.

Until 2010 however the IRS has ruled that this can be done only if the 401(k) plan of the employer specifically allows it to be done. There is no requirement that 401(k) plans must have such an inheritance provision within their plan.

Please keep in mind that some recent court cases have ruled that inherited IRA and Roth IRA accounts can be seized as part of a bankruptcy proceeding.


By Allan Rubin
updated March 30, 2008

To e-mail: or

Return to Home