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Roth conversion
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3 Replies
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Technically you don’t need a separate checking account, but best practices and easier record-keeping would lead to having a separate account for Roth and one for traditional funds. In my opinion it helps you keep accurate records and makes it much easier to not confuse funds accidentally. Is there a reason you don’t want to deal with another 401(k) bank account? Yes, it can be a challenge to open one at a local bank, but there are a handful of banks that specialize in providing accounts to solo 401(k)s and it is very easy to establish them at those banks.
I would discourage you from trying to do everything with just 1 bank account that covers both traditional and Roth. However, if you are very familiar with and use accounting software (something like QuickBooks) to record/track everything then you might be okay only having 1 account.
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Ahhh, I understand now. Technically I believe it could be done with a single bank account but there is a high risk of error that would manifest itself in an audit if one happened. Yes, that is easier for the external people you are paying or receiving funds from, but the burden is completely on you to manage the complexities internally. If that property is the only thing that bank account deals with (for example, if the property is in an LLC and it is the LLC that you are partially converting to Roth) then you may be able to do so and only deal with pro-rata splitting between Roth and traditional when funds are moved into or out of the LLC if the LLC is the owner of the bank account. But if that bank account deals with any other assets in your 401(k) things can get very complex tracking every transaction since some would need to be split and others wouldn’t.
I’m not sure I’d try to do everything with a single account, but if so I’d proceed with extreme caution. The consequences of any issues that may occur is very high.
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