Frequently Asked Questions

What are your options for your 401(k) plan once you leave an employer?

Generally, you have the following options:

What is a direct rollover?

A direct rollover is the tax-free movement of qualified retirement plan assets (such as a 401(k), pension, or profit sharing account) or a 403(b)(7) account to a traditional IRA. This is one of your options for your retirement plan when you leave your job.

How many days do you have to roll over a distribution from a qualified retirement plan?

Once you take a distribution, you have 60 days from the date the distribution is received to complete a rollover into an IRA or other qualified retirement plan. This is referred to as an indirect rollover.

If you change jobs or retire and take a cash distribution from your 401(k) account, what are the consequences?

Your employer will generally be required to withhold 20 percent for federal income taxes on the portion of your 401(k) that is eligible for rollover. If you do not roll over your retirement assets, they will be taxed as ordinary income. In addition, if you are under age 59½, your distribution will be subject to a 10 percent federal early distribution penalty.

I took a distribution from my 401(k) account, but I invested it in an IRA within the 60 day time limit. When I took the distribution, my employer withheld 20 percent. How can I recover that amount?

Your former employer cannot return that money to you. The only way to recover that 20 percent is to claim it on your federal tax return.

Can I roll my 401(k) into a Roth IRA?

Typically, contributions to a 401(k) or other qualified retirement plan are pre-tax. The only contributions that can be made to a Roth IRA are after-tax contributions (e.g., Roth 401(k) plans can be rolled directly into a Roth rollover IRA). Pre-tax contributions made to your former employer's retirement plan can also be rolled directly to a Roth IRA, however you will owe taxes on the pre-tax amount that is rolled over.
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