New Job - New 401(k)?
29 November 2006So you find yourself in a new job and need to do something with your 401(k), SEP IRA or SIMPLE IRA at the old company. You should carefully consider your options before just rolling that money into your new plan. Once it is in there, thats it, no more choice!
There are several possibilites for consideration.
1. Take a lump sum distribution, paying the tax liability and any penalty. Then do whatever you want with whats left (Note: The old plan will withhold 20% for Federal tax and there may be a 10% penalty as well.).
2. Directly rollover (transfer funds) from your old 401(k) into the new 401(k) plan or other employer sponsored plan.
3. Move that 401(k) into a Rollover IRA at your favorite brokerage (like Ameritrade).
4. Pay the tax and any penalty on the funds and put it into a Roth IRA (if you qualify) where you will not pay tax on any of the proceeds at distribution time.
5. If you are happy with the old 401k, you may be able to leave it where it is (check with your plan administrator).
Note: If what you have is a SIMPLE IRA or SEP IRA, things are handled pretty much the same as with a 401(k).
Above all, take the ideas above and discuss your particular situation with a tax professional and your plan administrator before deciding what to do with the funds in your 401(k), SIMPLE IRA or SEP IRA.
Personally at one point in time I had two orphaned employer sponsored IRAs that I rolled into one Rollover IRA at TD Ameritrade. With the funds in a brokerage account, you may be able to invest in more types of securities than your new employer sponsored plan offers.
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