The process is not too difficult, but there are ways that you can save money and minimize any risk that you might have for paying taxes. The following five tips will help you.
If you are staying with the same employer, the employer is likely to do all of the transition work for you at no cost to you. Generally, you will just need to sign documentation stating that the company is making the switch.
Learn the intricacies of the new 401k or other retirement account you are planning to get before you actually make the move. The reason for this is simple. You need to ensure that you know of any changes in the plans such as costs to you, loan options and the terms for withdrawal.
Consider giving yourself more control by moving to an IRA, but be warned, the IRA often has strict guidelines on how much you can deposit per year. In other words, an employer sponsored plan allows you to put away more each year.
Avoid getting a withdrawal or check from your employer’s custodian of your account. Rather, have them handle the transaction for you. Your new 401k account may handle the move for you, in fact. However, if you do take a withdrawal, you have just 60 days to get those funds back into a new account before you will be taxed heavily and face a 10 percent penalty.
Shop around. If you are making the move, it pays to spend some time considering all of your options and revisiting your retirement plan from time to time. Are you getting the most out of your retirement planning?
It is always advisable to have a trusted tax accountant or financial planner by your side before making this type of move. That way, you know what the best scenario for your needs is. It can also simply the process of the 401k roll over.
Julie-Ann Amos is a professional writer who writes on many topics, including roll over issues. For more info, check out the 401k Hardship Withdrawal blog.
