Liquidating an old 401k

09-Jan-2016 21:19 by 7 Comments

Liquidating an old 401k - vanessa anne hudgens dating now

If this is your first IRA, you’ll probably be surprised at the world of investments available at your doorstep, especially compared with the measly selection of 10 to 20 funds in your 401(k): You can invest in mutual funds — a much wider selection of them, including index funds and exchange-traded funds — as well as trade stocks and options.

You have two choices: You can come up with that ,000 out of pocket, from a savings or other account, and deposit the full ,000 into your new IRA.

The IRS has a sample letter you can use to self-certify that you’re eligible for a waiver.) Bottom line here: It’s much easier on your wallet — not to mention your accounting skills, or lack thereof — to do a direct rollover.

Once the money lands in your new IRA account, you can get down to the fun part: selecting your investments.

Your employer will send you a check for ,000 and withhold ,000 for taxes.

Within 60 days, you’ll need to deposit ,000 into the new IRA to avoid a penalty.

If you don’t, you’ll need to make two decisions: where to open that account — which means selecting an online broker or robo-advisor — and which type of IRA you want, a traditional IRA or a Roth.

The main difference between an online broker and a robo-advisor is that a robo-advisor will provide account management, for an annual fee of around 0.25%.

When it comes to a 401(k), you can take it with you.

In fact, you probably should, in the form of a 401(k) rollover.

On its face, an indirect rollover can feel like a short-term loan.

But before you go rolling around on your mattress of money, consider: Your employer will withhold 20% of the distribution as a safeguard for the IRS, in case you get too comfortable in your riches and decide to keep that cash.

That’s not to say you can turn a blind eye — we’d never recommend that — but there’s something to be said for turning over the bulk of the dirty work to someone (or, in the case of a robo-advisor, something) else.

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