“Now YOU can learn about retirement planning in plain English. Planning for retirement can be confusing. I cut through all the industry jargon so YOU can learn how to achieve your retirement goals.”
One of the most critical financial events that you will one day experience is your 401(k) rollover.
Why do I say it is “critical,” I mean that seems a bit dramatic doesn’t it?
Well, not exactly.
When you rollover your 401(k) into an IRA you want to make sure you don’t make any mistakes. If you do something incorrectly, it could cost you big in loss of tax deferral and potentially fees depending on your age.
Here’s what I mean, if you cash out your 401(k) it will all count as income for you in that tax year. This could push you into a higher marginal tax bracket.
Or if you have your 401(k) check made out to you with the intentions of putting it into an IRA, you could still be in trouble. You have 60 days to deposit the funds into an IRA. If you miss that deadline it will count as a distribution, with any taxes or fees that come with it.
And if you are under age 55 you will almost certainly pay the 10% penalty to the IRS for early withdrawal. If you are between 55 and 59 ½ you may not have to pay the 10% penalty depending on whether the 401(k) you withdrew from was at an employer from whom you quit working after the age of 55.
The details can get a little complicated.
So here are 5 myths about 401(k) rollovers. If you think these are true you could end up making a big mistake with your retirement savings.Continue Reading