I have recently quit working and am considering cashing in my 401k. Approx how much will I loose compared to rolling it over into a ira and then cashing that in?
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I have recently quit working and am considering cashing in my 401k. Approx how much will I loose compared to rolling it over into a ira and then cashing that in?
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Hi,
I hope this message doesn't get to you too late. Quick questions would be how old are you? Also, what other investments do you have to supplement your income?
Are you at retirement age? If you are then why not just draw money from the 401k instead of cashing it in? There is a 10% penalty that is assessed along with other fees. Check with the company that setup the 401k at your company and ask them the details as to what it would cost to just cash it in. That's what they are there for to answer your questions-I'm surprised you didn't ask you employer these things before you left. I also believe there is a law that the company you have your 401k can hold it for you for a certain amount of time. I'd check on that also.
When I quit my last job I waited to long to roll over my 401k and I lost 20% when they sent me the check but I can get that back on my taxes next year. This will make a huge difference if you have a rather large amount in your 401k. This is something that would take a lot of thought.
TMoore:
If you are at or past the age of 59.5, then you can draw on your 401K and pay no 10% penalty. You will, however, pay income taxes on the distribution.
If you are below the age of 59.5, then it would be best to roll the money over into a rollover IRA. The best (and In my opinion the only) way to handle that is to do a custodian-to-custodian transfer. Contact any bank/mutual fund/brokerage house and ask them for the paperwork to do such a custodian-to-custodian transfer, then take it to the 401K manager, and they will handle it for you. That way, nothing will be withheld for income taxes. If you have the 401K manager distribute the money to you, by law they have to withhold 20% for income tax purposes, which you have to make up out-of-pocket when you roll it over into the IRA yourself. The custodian-to-custodian transfer is cleaner and simpler. As to where to roll the money over to, that depends on your age, risk tolerance, marital/children situation and a host of other factors too involved to discuss at this point.
If you are below the age of 59.5 and you have to have the money, you can avoid the 10% penalty by taking the distribution in a series of roughly equal amounts over a period of years. The 401K manager should be able to advise you as to how many years you have to spread over the distribution.
Hope this helps!
Atlanta Tax Expert
My daughter is 21.Quote:
Originally Posted by Greeko
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