Rollovers and Transfers

Rollovers and Transfers

What to do if you're switching jobs

Don't make this mistake when you transfer funds

What to do if you're switching jobs

You may forfeit some or all of the money contributed by your employer

Remember that all money saved by you remains yours

You can transfer your 401(k) money from your old employer's plan to your new employer's plan

You may want to do this if your new employer has a good 401(k) plan with plenty of investment choices

Or you can roll your 401(k) money into your own IRA

You may want to do this if your new employer has limited investment options

You may want to roll your 401(k) money into a conduit IRA which is separate from your other IRA money

The money in the conduit IRA may be eligible for potentially favorable five-year averagingwhen you retire

However, five-year averaging is only a minor advantage that most people probably won't use

New tax law will eliminate five-year averaging after year 2000

Don't make this mistake when you transfer funds

When transferring money from one plan to another, don't take receipt of the money

Have the plans transfer the money between themselves

If you take receipt of the money, 20 percent of the money will be withheld for the payment of income taxes

This money is withheld even if you deposit the funds in a new plan within the 60 day window

If you don't deposit funds in your new plan within 60 days, you'll also probably owe additional income and penalty taxes