Comments on: How to Roll Over Your 401(k) When You Leave or Lose Your Job – The 401k Rollover http://genxfinance.com/2009/01/15/how-to-roll-over-your-401k-when-you-leave-or-lose-your-job-the-401k-rollover/ Helping a unique generation achieve financial independence. Wed, 17 Mar 2010 19:21:21 +0000 http://wordpress.org/?v=2.9.1 hourly 1 By: Marshall http://genxfinance.com/2009/01/15/how-to-roll-over-your-401k-when-you-leave-or-lose-your-job-the-401k-rollover/#comment-129152 Marshall Tue, 16 Mar 2010 20:23:42 +0000 http://genxfinance.com/?p=1039#comment-129152 Thank you E.J Peiker and Dean Voelker for your excellent responses to my questions about pension funds and IRA's. It is greatly appreciated! Thank you E.J Peiker and Dean Voelker for your excellent responses to my questions about pension funds and IRA’s. It is greatly appreciated!

]]> By: Dean Voelker http://genxfinance.com/2009/01/15/how-to-roll-over-your-401k-when-you-leave-or-lose-your-job-the-401k-rollover/#comment-129123 Dean Voelker Tue, 16 Mar 2010 15:07:00 +0000 http://genxfinance.com/?p=1039#comment-129123 Hi Marshall, You ask a good question. I'm not a tax pro, but I am a Series 7 & 63 licensed financial advisor. There is a "60 Day Rule" for lump sum distributions, which means that you have 60 days from the time you receive the money to put it into an IRA. Of course, you have to verify this to show that it was done in less than 60 days. A direct rollover is certainly much easier (and less costly). You also mention that you had her put the money into a Roth IRA. You need to check on this for 2 reasons. First, in a Roth IRA, you would need to pay the taxes up front. Second, you need to make sure that the IRS isn't looking at that Roth money as a "contribution" instead of a "rollover". There are 2 main types of IRAs - Traditional (pre-tax money) and Roth (post-tax money). When a rollover happens, it goes into the Tradtional which is pre tax like the 401(k) or 403(b). To convert from Traditional to Roth means paying the taxes on the amount you convert. So by putting the money into a Roth, you would be taxes on the money. Also Roth contributions are limited to $5000 ($6000 if you are over age 50). You need to be sure that the IRS isn't considering this a contribution. I've been reading many of the questions here. There is no doubt that employers need to do a much better job of educating their staff on how to use 401(k)s. This is a big topic of my book, "Help! My 401(k) Has Fallen - And Must Get Up!" The book will be available by late April 2010. You can also get free report "The 5 Biggest Problems With 401(k) Plans" through my website. (Just click my name.) Hi Marshall,

You ask a good question. I’m not a tax pro, but I am a Series 7 & 63 licensed financial advisor.

There is a “60 Day Rule” for lump sum distributions, which means that you have 60 days from the time you receive the money to put it into an IRA. Of course, you have to verify this to show that it was done in less than 60 days.

A direct rollover is certainly much easier (and less costly). You also mention that you had her put the money into a Roth IRA. You need to check on this for 2 reasons. First, in a Roth IRA, you would need to pay the taxes up front. Second, you need to make sure that the IRS isn’t looking at that Roth money as a “contribution” instead of a “rollover”.

There are 2 main types of IRAs – Traditional (pre-tax money) and Roth (post-tax money). When a rollover happens, it goes into the Tradtional which is pre tax like the 401(k) or 403(b). To convert from Traditional to Roth means paying the taxes on the amount you convert.

So by putting the money into a Roth, you would be taxes on the money. Also Roth contributions are limited to $5000 ($6000 if you are over age 50). You need to be sure that the IRS isn’t considering this a contribution.

I’ve been reading many of the questions here. There is no doubt that employers need to do a much better job of educating their staff on how to use 401(k)s. This is a big topic of my book, “Help! My 401(k) Has Fallen – And Must Get Up!”

The book will be available by late April 2010. You can also get free report “The 5 Biggest Problems With 401(k) Plans” through my website. (Just click my name.)

]]> By: E.J. Peiker http://genxfinance.com/2009/01/15/how-to-roll-over-your-401k-when-you-leave-or-lose-your-job-the-401k-rollover/#comment-129072 E.J. Peiker Mon, 15 Mar 2010 23:54:28 +0000 http://genxfinance.com/?p=1039#comment-129072 Marshall, I am almost 100% certain that this is not possible. I am not a tax professional but I have studied this extensively and I have always read that once you put that money into you savings account, your forfeited the chance of tax deferred status and must pay the withdrawal tax penalty unless you are over 59 1/2. Marshall, I am almost 100% certain that this is not possible. I am not a tax professional but I have studied this extensively and I have always read that once you put that money into you savings account, your forfeited the chance of tax deferred status and must pay the withdrawal tax penalty unless you are over 59 1/2.

]]> By: Marshall http://genxfinance.com/2009/01/15/how-to-roll-over-your-401k-when-you-leave-or-lose-your-job-the-401k-rollover/#comment-129066 Marshall Mon, 15 Mar 2010 21:29:22 +0000 http://genxfinance.com/?p=1039#comment-129066 Following our recent marriage, my wife took a lump-sum distribution from her pension fund after she left her teaching job to relocate from NJ to MA. Unaware of roll-overs or the tax consequences (20% withholding tax and 10% penalty tax), she deposited the check into a regular savings account. Once I learned about this, I immediately had her put the funds into a Roth IRA, but which was not done in a timely manner (approximately 100 days). If it is possible, I would happily put the entire distribution back into the pension fund and start all over again in order to complete this the correct way through a direct rollover. Is this a possibility? Because paying all this tax was really an unnecessary mistake! Thanks. Following our recent marriage, my wife took a lump-sum distribution from her pension fund after she left her teaching job to relocate from NJ to MA. Unaware of roll-overs or the tax consequences (20% withholding tax and 10% penalty tax), she deposited the check into a regular savings account. Once I learned about this, I immediately had her put the funds into a Roth IRA, but which was not done in a timely manner (approximately 100 days). If it is possible, I would happily put the entire distribution back into the pension fund and start all over again in order to complete this the correct way through a direct rollover. Is this a possibility? Because paying all this tax was really an unnecessary mistake! Thanks.

]]> By: codedaddy http://genxfinance.com/2009/01/15/how-to-roll-over-your-401k-when-you-leave-or-lose-your-job-the-401k-rollover/#comment-128972 codedaddy Sun, 14 Mar 2010 22:30:38 +0000 http://genxfinance.com/?p=1039#comment-128972 I'm 73 and plan to work several more years fulltime, but would like to rollover my 401k in order to have a self directed plan. I fear that if I die, my wife, who has a disability, would have difficulty setting up annuities or other investment. If possible I'd like to have both an annuity and a self-directed IRA that I can manage and very little action would be required by my wife to begin withdrawals. Assuming that my 401k plan forbids partial rollover and I must leave my employment in order to carry this plan forward, can I then rejoin my company or another, with or without a new 401K? I can't seem to find others with this question in my internet research thus far. I’m 73 and plan to work several more years fulltime, but would like to rollover my 401k in order to have a self directed plan. I fear that if I die, my wife, who has a disability, would have difficulty setting up annuities or other investment. If possible I’d like to have both an annuity and a self-directed IRA that I can manage and very little action would be required by my wife to begin withdrawals. Assuming that my 401k plan forbids partial rollover and I must leave my employment in order to carry this plan forward, can I then rejoin my company or another, with or without a new 401K? I can’t seem to find others with this question in my internet research thus far.

]]> By: E.J. Peiker http://genxfinance.com/2009/01/15/how-to-roll-over-your-401k-when-you-leave-or-lose-your-job-the-401k-rollover/#comment-128840 E.J. Peiker Fri, 12 Mar 2010 23:00:16 +0000 http://genxfinance.com/?p=1039#comment-128840 I retired from my employer of 27 years and rolled over my 401K just last month. Am I still allowed to contribute $6000 to the IRA in 2010 or do I have to wait until 2011. I'm not clear whether the roll-over itself counts as this year's contribution. Any clarity on this would be greatly appreciated. I retired from my employer of 27 years and rolled over my 401K just last month. Am I still allowed to contribute $6000 to the IRA in 2010 or do I have to wait until 2011. I’m not clear whether the roll-over itself counts as this year’s contribution. Any clarity on this would be greatly appreciated.

]]> By: Gretchen http://genxfinance.com/2009/01/15/how-to-roll-over-your-401k-when-you-leave-or-lose-your-job-the-401k-rollover/#comment-128832 Gretchen Fri, 12 Mar 2010 21:26:56 +0000 http://genxfinance.com/?p=1039#comment-128832 Would like to leave my current employer. I have invested both pretax and posttax dollars. Typically, as a shareholder, all bonus shares are post tax. My question is, I took out a loan and I understand that if we terminate employment we have to pay back the loan within 30 days. My question is, since obviously if I had the money to pay it back I wouldn't have had to take the loan in the first place, is there a way to get around early withdrawal penalties? Can the loan be paid off with the remaining posttax share's that the company will buy back from me or is this still considered early withdrawal and since shares were purchased post tax could I only be hit with the 10% penalty if I reduced the outstanding balance against the posttax shares instead of the ESOP/matching/pretax money? Would like to leave my current employer. I have invested both pretax and posttax dollars. Typically, as a shareholder, all bonus shares are post tax. My question is, I took out a loan and I understand that if we terminate employment we have to pay back the loan within 30 days. My question is, since obviously if I had the money to pay it back I wouldn’t have had to take the loan in the first place, is there a way to get around early withdrawal penalties? Can the loan be paid off with the remaining posttax share’s that the company will buy back from me or is this still considered early withdrawal and since shares were purchased post tax could I only be hit with the 10% penalty if I reduced the outstanding balance against the posttax shares instead of the ESOP/matching/pretax money?

]]> By: Dean Voelker http://genxfinance.com/2009/01/15/how-to-roll-over-your-401k-when-you-leave-or-lose-your-job-the-401k-rollover/#comment-128458 Dean Voelker Mon, 08 Mar 2010 17:58:14 +0000 http://genxfinance.com/?p=1039#comment-128458 I don't know about your bills, Crownroyal, but you definitely took a hit on your 401(k) with taxes and withholding. A rollover into an IRA would have reduced your taxes (and penalty since you are under 59 1/2). If you still really needed to pay off some bills, at least the balance would have stayed in an IRA - not subject to tax. I have seen clients use part of their rollover for paying bills and debts, but its also important to consider if you are better off keeping the money in an IRA - or paying the bills. 7 Years makes some great points about the value of professional advice. Regarding your other $30,000, I'd say that I would need to know more about you situation before offering advice. Other savings? Need for income? Risk tolerance? Feel free to contact me if I can help. Consultations are free. I don’t know about your bills, Crownroyal, but you definitely took a hit on your 401(k) with taxes and withholding. A rollover into an IRA would have reduced your taxes (and penalty since you are under 59 1/2). If you still really needed to pay off some bills, at least the balance would have stayed in an IRA – not subject to tax. I have seen clients use part of their rollover for paying bills and debts, but its also important to consider if you are better off keeping the money in an IRA – or paying the bills.

7 Years makes some great points about the value of professional advice. Regarding your other $30,000, I’d say that I would need to know more about you situation before offering advice. Other savings? Need for income? Risk tolerance? Feel free to contact me if I can help. Consultations are free.

]]> By: 7 Years in Madrid http://genxfinance.com/2009/01/15/how-to-roll-over-your-401k-when-you-leave-or-lose-your-job-the-401k-rollover/#comment-128454 7 Years in Madrid Mon, 08 Mar 2010 17:20:34 +0000 http://genxfinance.com/?p=1039#comment-128454 Remember never take possession of the money until the transaction is completed. All, the above advice is quite good. In the end if you are of Gen-X age, older or younger and maybe I am preaching to the choir. Time to get a broker, proper financial institution and tax preparation pro. All my assets are under one roof and I have a professional to do things like this, not to mention advice. The fees I pay and time I spend in their offices is like going to the dentist or doctor or a car mechanic for a check up. In each and every case saves you money, headaches and gives you peace of mind. Remember never take possession of the money until the transaction is completed. All, the above advice is quite good. In the end if you are of Gen-X age, older or younger and maybe I am preaching to the choir. Time to get a broker, proper financial institution and tax preparation pro. All my assets are under one roof and I have a professional to do things like this, not to mention advice.

The fees I pay and time I spend in their offices is like going to the dentist or doctor or a car mechanic for a check up. In each and every case saves you money, headaches and gives you peace of mind.

]]> By: crownroyal53 http://genxfinance.com/2009/01/15/how-to-roll-over-your-401k-when-you-leave-or-lose-your-job-the-401k-rollover/#comment-128373 crownroyal53 Sun, 07 Mar 2010 21:43:38 +0000 http://genxfinance.com/?p=1039#comment-128373 i just my left my current employer. I am 55 years old after before I left.I currently have $66000 in my 401k with that employer. Since I didn't have any money, and all my bills are due, I option for distribution even though I knew it wasn't the best of option. My question is i received $53000 after 20% withholding, and I spent $20000 of that $53000 on my bills.Leaving me with about $30000.What will be the best course of financial action for that remaining $30000? i just my left my current employer. I am 55 years old after before I left.I currently have $66000 in my 401k with that employer. Since I didn’t have any money, and all my bills are due, I option for distribution even though I knew it wasn’t the best of option.
My question is i received $53000 after 20% withholding, and I spent $20000 of that $53000 on my bills.Leaving me with about $30000.What will be the best course of financial action for that remaining $30000?

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