Thinking about a rollover from your old 401(k) or other savings plan to an? It’s a painless move (we swear) that could pay off in the long run.
Desk pictures boxed up? Check. Two hundred soy sauce packets tossed? Check. Anything else before you walk out that office door a final time? Oh, yeah—what about your 401(k)?
Job changes can complicate keeping track of employer-sponsored(QRP), of which 401(k)s are the most common. What about when you retire and leave the workforce for good? What should you do with your 401(k) then?
This process involves IRS regulations, so it’s understandable if you have many questions. Typically, once your employment ends, you have four options for your company-sponsored retirement assets:
1. Leave all or part of the money in your former employer’s plan, if permitted 2. Roll the funds into a new employer’s plan (assuming you continue to work), if available and rollovers are permitted 3. Roll over the assets into an Individual Retirement Account 4. Cash out the balance, coughing up the applicable taxes and penalties (which depend on your age and circumstances)
Qualified Retirement Plans
A plan that meets requirements of the Internal Revenue Code and so is eligible to receive certain tax benefits.
Individual Retirement Account (IRA)
Account a person can contribute up to a specific amount (currently $5,500 for individuals) every year. The growth on IRA funds is tax-deferred and, depending on personal circumstances, contributions may be tax-deductible (withdrawals prior to age 59 ½ may be assessed a 10% IRS penalty). Withdrawals from Traditional IRAs are taxed at current rates.