[ps410302]

I had a defined-contribution pension plan for many years in New York State. It has been inactive for 1 year now as I now have a corporate 401K plan instead. I do not want to roll it over to an IRA - for 4 tax years I have been able to add to a Roth IRA by first contributing to a non-deductible traditional IRA (my income is over the limit for a deductible IRA ANYWAY), and then immediately converting this contribution to a Roth IRA, thus there are absolutely no taxes ever due. However, if I do have to roll over the older pension monies to an IRA, then almost all of my tax avoidance is gone (just the tiny proportion of the conversion from the present contribution to the non-deductible IRA is not taxed) so I wouldn't do the Roth anymore in this case. So, do I HAVE to roll over an inactive pension plan, or can I leave it in its present form, or is there some other non-IRA way for the pension money to go?

[ebaines]

1. You only have to roll over your old pension plan if the plan requires it. Some plans require ex-employees take distributions or do a roll over once they are no longer employed, but many plans let you leep the account open as long as it exceeds some minimum threshold (typically $5K or so). Your pension plan administrator should be able to tell you what your options are.

2. Keep in mind that sooner or later you have to pay taxes on ALL yuor retirement plans. In the case of your stategy with the Roth plans you are paying taxes now rather than later - that's essentially a bet on your part that your tax bracket will be higher when you retire and start withdrawing than they are now.

3. Rolling your pension to an IRA plan does not generate any tax bill at all, until such time as you start taking withdrawals. The decision as to whether to leave the account alone or roll it to an IRA should be driven by factoprs such as (a) where you can have the best options for investment choices, (b) which has lower expenses, and (c) whether consolidating plans simplifies your record keeping by. Taxes do not play a part, since all else being equal your tax bill will be the same regardless.

4. Your rationale for no longer doing your Roth contributions if you roll your pension to an IRA doesn't make sense. Again, it doesn't matter whether you have a tax-deferred pension plan or a tax-deferred IRA - sooner or later you will pay those taxes.

There really are no other options - no way to convert a tax-deferred plan into a tax-fre one without paying taxes on the conversion.