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Among the most frequently asked question that we get
are those that deal with withdrawals from 401k plans. Similar to IRA plans,
withdrawal rules from 401k plans differ depending on age. Assuming that you
no longer work for the employer sponsoring the 401k plan or you are retired
or about to retire, then your options are as follows:
Your options are as follows if you are under 59 ½
-Take a lump sum distribution, in which case your 401k
plan provider will write you a check for the value of your account less a
20% withholding tax mandated by the IRS, and a 10% withdrawal penalty. The
20% tax that is withheld, but NOT the 10% penalty, will be counted against
your income tax payable or will be counted towards any refund due for the
tax year when you file your tax return.
-You can do nothing and leave it with your previous
employer.
-Roll it over to an IRA or a solo 401k (if you are
planning to open your own one person business)
Your options if you are over the age of 59 ½ but
under 70 ½:
-Take a lump sum distribution, in which case your 401k
plan provider will write you a check for the value of your account less a
20% withholding tax mandated by the IRS. The 20% tax that is withheld will
be counted against your income tax payable or will be counted towards any
refund due for the tax year when you file your tax return. Withdrawals after
age 59 ½ are penalty free.
-You can do nothing and leave it with your previous
employer.
-Roll it over to an IRA or a solo 401k (if you are
planning to open your own one person business).
Your options are as follows if you are 70 ½ or older
-Take a lump sum distribution, in which case your 401k
plan provider will write you a check for the value of your account less a
20% withholding tax mandated by the IRS. The 20% tax that is withheld will
be counted against your income tax payable or will be counted towards any
refund due for the tax year when you file your tax return.
-Leave it with your employer 401k plan but start taking
the required minimum distributions.
-You can do nothing and leave it with your previous
employer. In this event, you will be taxed 50% of the required minimum
distribution.
-Roll it over to an IRA or a solo 401k (if you are
planning to open your own one person business). You still have to take the
required minimum distribution even if you roll it over to an IRA.
To get more information or to get a 401k rollover
started please fill out the form below or click
here.
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