Ask Experts Questions for FREE Help !
Ask
    Buckeye fan's Avatar
    Buckeye fan Posts: 1, Reputation: 1
    New Member
    		  
    #1

    Nov 27, 2006, 09:00 AM
    Rolling 401k to an IRA
    I have heard that you can roll a 401k into an IRA with no penalty. I have also heard that you can make a one time penalty free $10,000 withdrawal from an IRA for a first time home buyer. If both of these are true is this a potnetial way to get around the penalty from making the withdrawal directly from a 401k?
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
    		  
    #2

    Dec 21, 2006, 10:38 AM
    Buckeye Fan:

    Yes, you CAN roll the assets from a 401K into a rollover IRA with NO penalty or taxes due. The 401K custodian has to do the rollover, but the custodian of the IRA will help you accomplish that.

    You can get a distribution of up to $10,000 for the first-time purchase of a home without paying the 10% Early Withdrawal Penalty. You WILL have to pay income taxes (both state and federal) on the $10K, however.

    Check to see if you can BORROW the money from the 401K. That is a better option than making the withdrawal and paying the tax. You have to pay the loan back with interest, but you are paying YOURSELF rather than a bank.

    If that is not an option, then do the rollover to the IRA, then take the distribution under the first-time homebuyer provision. Be SURE to get your tax return done professionally to make sure it is reported properly.
    ScottGem's Avatar
    ScottGem Posts: 64,966, Reputation: 6056
    Computer Expert and Renaissance Man
    		  
    #3

    Dec 21, 2006, 01:12 PM
    One point to add to this. The rollover provision exists to provide for an employee who is forced to take a distribution from a plan upon termination of employement. You can't withdraw money from a 401K to rollover into an IRA.
Not your question? Ask your question View similar questions
 

Question Tools Search this Question
Search this Question:

Advanced Search

Add your answer here.


Check out some similar questions!

Rolling viens [ 4 Answers ]

I use to have "great veins", the blood donation clinic use to love seeing me come through the doors. The couple of months ago, I needed to have blood work done at my doctor's office. The nurse in the lab had a very difficult time sticking my veins, they kept rolling on her. Since, she was new to...

401k to Roth IRA [ 3 Answers ]

I am an italian citizen who worked in the US for 5 years on a H1-B visa. I will be going back to Italy for good at the end of March 2006 and I want to rollover my 401k to a Roth IRA (through a direct rollover IRA). The amount in the 401k is around $40,000. My income for 2005 was $49,000. If I...

Rolling Pin ? [ 2 Answers ]

Hello, I have a question that my friends and I have been wondering about. Is there a proper name for the rolling pin. Please let me.

Should I move my former 401k into an IRA [ 1 Answers ]

Hi I have taken a dist from my former 401k into an eligible retirement a/c. If I open an IRA should I merge the former 401k-eligible retirement a/c to this IRA?

View more questions Search