Can I contribute additional money to a rollover IRA?

Question

I rolled over funds in an old 401k with a previous employer into a Rollover IRA. I want to contribute more money to that IRA that is not part of any qualified plan. Can I do this or do I have to open a separate IRA to contribute my own money.

Answer 1

You can, but I wouldn't recommend it. What you are talking about is called comingling. This can cause several problems:

1 - once you add new money you can never roll that money back into a 401k
2 - unless you are able to use the contribution as a deduction, you are adding after-tax money to pre-tax money which causes an accounting nightmare.

A better solution is to open a Roth and fully fund that instead. However, if you don't qualify for a Roth, you can contribute to a rollover *if* the following are both true:

1 - you will never want to roll it into another 401k
2 - you can use the full contribution amount as a deduction (be careful of the limits, they are pretty low).

So, it depends on your situation. But, a Roth is a better bet.

Make sure that, if you are investing in funds, wherever you have your investment offers a good selection of low-fee, no-load funds and is not a bank or anything similar. When buying fudns you should always go to the source and skip the middle-man fees.

Good luck!

Answer 2

I rolled over a 401k last year with another company. I also wanted to contribute more with this account. I contacted Fidelity, this is who the fund is with, and I was told to wait 1 year and the same rules apply as any other fund. I can contribute the maximum within that account. I was never told I could not contribute to this new rollover account. Call you fund manager for full details.

Answer 3

you have to open up another IRA, unless you are rolling over additional 401K money from another job into the plan.