I-R-HoorAy, ho, hey, ho.

stupid brain

It’s a good thing I have a cousin-in-law that works for a Wells Fargo retail branch. He always fills me in on things I need to know about the companies personal banking products (Girl Ninja and I are WF clients). Normally I’d be all about a local credit union or community bank, but Wells Fargo has a product line called the Portfolio Management Account (PMA) that is pretty swaggerific.

It has some standard benefits like free checking, free cashiers checks, custom ATM cards; but the thing that really makes it stand out from the competition is the fact that a PMA member can make 100 free trades each year through their Wells Fargo brokerage account. The $30 annual fee for these types of accounts is also waived.

If you have the assets necessary to qualify, the PMA package is pretty much the best thing out there. Or at least that was true 10 days ago.

On March 31st, my cousin-in-law informed me that the 100 free trades benefit was disappearing on April 1st. Wells Fargo now charges a $6.95 per trade fee to any newly opened PMA accounts. That’s not an excessive amount by any means (E*Trade is $8), but that’s a heck of a lot more than the $0 per trade I’ve been paying for the last five years.

The accounts Girl Ninja and I already have are grandfathered in (my Roth, her traditional). But what if I quit my job a year from now. In the event I change careers, I’ll need to roll my 401k assets in to a traditional IRA. Meaning my new traditional IRA would be subject to the $7 fee.

Fortunately, I was able to call at about 8pm on Easter Sunday and get a traditional IRA opened up if/when this becomes a reality.

Problem solved.

Well except for the fact that I have never contributed to a traditional IRA before and made a major boo-boo. I told Wells Fargo to throw $1,000 in to my new traditional IRA for the 2012 tax year. Thinking I was a good boy for putting a little more away for future-me.

Not so fast! Apparently if you max out your Roth IRA, you aren’t suppose to contribute to a traditional IRA (or vice versa).

Basically I’m only allowed to contribute $5,000 total between my traditional AND Roth IRAs. I already maxed out my Roth ($5,000) a few months ago, so my recent $1,000 addition to my traditional puts me over the maximum allowed contribution. If I left things how they are the IRS would come kick my door down, punch me in the face, and penalize me for over-contributing. How lame!

Ugh, I remember the days where I worried if I should have Golden Grahams or Cinnamon Toast Crunch for breakfast, now I’m worrying about getting a visit from Uncle Sam for investing too much. Growing up sucks.

Completely unrelated note: Anyone work in medical/pharmaceutical/tech sales. I want to explore that career field and would like to pick someone’s brain! Not literally. Literally picking your brain would be kind of weird.


16 thoughts on “I-R-HoorAy, ho, hey, ho.”

  1. I too have a Wells Fargo PMA account, but I don’t use it like I should, as you know from my investment fears. I wonder when I’ll get over that…

    I totally know of a person you should talk to regarding pharmaceutical sales 🙂 My first encounter with him on his blog was quite ugly because of my jealousy of those who make more money than me, as you totally know. I’ve found some peace after I embarrassed myself on this blog. I still have some resentment towards CEO’s and corporations because I feel they put profit ahead at ALL costs destroying anything and anyone who gets in the way. Anyways…he is the blogger who writes I AM 1 Percent. And I thought I had a douchebag name ;P j/k!

  2. I don’t know if it’s possible, but you could try calling Wells Fargo to see if they can change the designation of your contribution to tax year 2013. If you’ve already put in $5,000 in your Roth for 2013, the new IRA contribution limit is $5,500 so even if they can only change the designation for part of your contribution you would still be able to achieve your grandfathering-in objective.

  3. That sucks that you can only contribute to both of them together at $5k! I was also under the assumption that was just for the Roth. Maybe they should make a law that says you get tax benefits on contributions up to $5k and then after that you’re on your own. (Not that I am maxing it out or anything. Still working on punching out student debt.)

  4. You may contribute $5000 in total to your IRAs for any calendar year. Excess contributions are subject to a 6% tax reportable on Form 5329. But a separate issue not yet mentioned: depending on income, your traditional IRA may not be deductible in whole or part if you and/or GN are covered by an employer-sponsored plan like a 401(k) or 403(b). That is why, since I contribute to a 401(k) and sometimes a Roth, I do not make contributions to my traditional IRA.

    Matt has the right idea:
    a) By April 15 of this year, withdraw $1000 in contributions from the Roth for 2012.
    b) Again by April 15, deposit $1000 to the Roth for 2013. Your total IRA for 2012 is now $5K.
    c) Or make things 10x harder for yourself by consulting IRS Pub 590:

    • Good Info Larry. Yeah I had called and asked to have my 2012 IRA contribution changed to 2013. Didn’t know about the lack of tax deduction on IRA if we are covered by a 401k, interesting. Will have to dig in to that more to find out. Seems weird that I would deposit $1,000 of after tax money in to a “pre-tax” type account and then get charged tax again on it down the road when I withdraw. Got a link handy for me?

      • If you don’t want to wade through the IRA publication linked above, try these:


        You don’t get double-taxed. What happens is that if you can’t deduct the IRA either in whole or part (as an adjustment on page 1 of the 1040), the non-deductible portion takes on the character of a Roth. (Not sure, but this provision may have been in place before the Roth was actually introduced.) To the degree that you can deduct the IRA, it reduces your AGI and the deductible portion is tax-deferred.

        Bear in mind also that when you leave a job, you have 60 days to rollover your 401(k) with no taxable event to a traditional IRA. After age 59.5, depending on your 401(k) provisions, you may be also able to rollover your 401(k) while on the job to a traditional IRA – which I have done as it consolidates my assets and gives me greater investment choices. My traditional is much larger than my Roth for these reasons – rollovers from previous jobs and the so-called “in-service” rollover at age 59.5 from my current 401(k).

        Got all that?

        • BTW, just because I feel like adding this: it’s the possible non-deductibility of traditional IRA contributions that explains why the total annual contribution to IRAs of all types is $5000 (for people under 50; add another $1000 if you’re older). In essence, since you don’t know how much is non-deductible until you file your taxes, it’s conceivable that within a traditional account you can have both before-tax and after-tax amounts for a single contribution year.

      • You have longer than 60 days to roll your 401k over in to a traditional IRA. Girl Ninja left San Diego School District two years ago, but we just rolled her 403b balances over about a month ago. I believe it is more accurate to say you have 60 days from the date you withdraw your 403b funds, to deposit them in to your new traditional IRA (but even in that situation I think the bank automatically withholds 25%, temporarily, in case you don’t make that deposit). Is that what you were saying?

        • Probably so, if you remain in the 401k/403b after leaving. I’ve always done the rollover immediately after leaving a job, rather than staying in the previous 401k. I don’t know where the bank would come in, as I’ve always sent the 401k directly to my traditional IRA account.

  5. C The Writer: You’ve seen the stick figure cartoon of you and future you before, but not the article…

    NINJA: I work in the pharma sales field. I am in the marketing side of the field, so I work with sales reps and marketing managers, etc. Feel free to email me any questions you have. I’m curious to know why you are exploring that industry.


  6. Ninja – big question for you! Does the $5,000 yr max between roth/traditional IRA pertain to rolling a 401k over to a traditional IRA as well? I just changed jobs and will be moving my old 401k into a traditional roth – is this not allowed if over 5k??? Thanks!

    • See if this helps:

      You have me confused with the term “traditional Roth.” There is a traditional IRA, tax-deferred to the extent that you can deduct all your contributions on page 1 of Form 1040 (and remember, this depends on whether you have an employer-sponsored plan like a 401k). And there is also a Roth IRA, which is funded with after-tax dollars. The $5K limit pertains solely to annual total contributions to all your IRAs. (There is also a Roth 401k, but I assume that’s not your concern.)

      Because of their tax status, the two types of IRA cannot be commingled. But since both a 401k and a traditional IRA are tax-deferred, you absolutely can rollover the whole of your 401k to a traditional IRA after leaving a job. Just have the rollover executed within 60 days as a direct transfer to the traditional IRA trustee.

      HTH, but please be sure to confirm all tax information with a qualified professional.

  7. I searched on the internet about IRA. Not sure which one is good for me – gold IRA or Roth IRA. Can anyone help??

Comments are closed.