How to roll over your 401(k)

[Pages:1]How to roll over your 401(k)

What can you do with a 401(k) after you leave a job? Explore your options.

If you've recently left your job, you may be wondering what you should do with the funds in your 401(k). Cash out? Leave them? Transfer them? Roll them into an IRA?

Explore the pros and cons of each option, and consider talking with a nancial professional to determine which might work best for you.

Cash out your earnings

Pros

? Immediate access to your money

Cons

? Money not available for future retirement needs

? May be subject to 20% federal income tax rate

? May be subject to 10% federal tax for early withdrawals before age 59?

? May be subject to state and local taxes

Leave them in your old employer's retirement plan

Pros

? Retirement investment continues to grow

? Tax-deferred until withdrawal

Cons

? Cannot make additional contributions

? Subject to different rules than your new employer's retirement plan

? Investment options limited by old employer

? Tax penalty for early withdrawals before age 59?

Transfer them into your new employer's retirement plan

Pros

? Can continue to make new contributions

? Ability to manage rolled-over money and new contributions collectively

? Tax-deferred until withdrawal

Cons

? Investment options limited by new employer

? Tax penalty for early withdrawals before age 59?

Roll them into an outside IRA

Pros

? Not restricted by your employer's retirement plan

? Tax-deferred until withdrawal

? Direct rollovers from 401(k) to IRA will not incur federal income tax

Cons

? Account fees may be higher than employer-sponsored plan

? Tax penalty for early withdrawals before age 59?

? Indirect rollovers may incur 20% federal income tax

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