In my RE "covert operations" plans I'm thinking of moving money out of some of my company's 401K plan into an existing IRA . Has anyone ever done this and is it even permitted? The work 401k is administered by Cigna so it's not as if the money's in a company account. My "non employer" IRA has a better track record and return. Any Ideas?JimWho has secret plans for 2001 July 4th. MY independence day.
(1) Problem Post(2) Penalty Box
In my RE "covert operations" plans I'm thinking of moving money out of some of my company's 401K plan into an existing IRA . Has anyone ever done this and is it even permitted? The work 401k is administered by Cigna so it's not as if the money's in a company account. My "non employer" IRA has a better track record and return. Any Ideas?JimWho has secret plans for 2001 July 4th. MY independence day.I had the unenviable job at one point of working 401k plan administration on my former company, and I can tell you - it depends... (I know - too many of life's questions come out that way!)Some plans you can, some plans you can't. My personal experience has been that most of them you can't move money out until you have left the company. However, that certainly doesn't mean that you can't ask!Cindy
In my RE "covert operations" plans I'm thinking of moving money out of some of my company's 401K plan into an existing IRA . Has anyone ever done this and is it even permitted?Jim,I think it depends upon your employer's plan. For instance, we could rollover all our 401K, not part of it, but not be eligible to contribute for a whole year afterward. Or maybe it is that we wouldn't get matched. A little fuzzy on that. Anyhow, check with your plan. You don't even have to tell them who you are if you are concerned about it leaking back.Good luck,InParadise
Yes it possible to move a 401k into an IRA. Most of the big mutual fund families have proceedures to do this. I happened to move my 401k into a traditional Vanguard IRA in 1998. It is not quick nor simple since the holder of the 401k has no incentive to move quickly in the transfer. I'm sure there are other options such as banks etc. If you call a large mutual fund company, they will more than willing to help. The thing Vangurad did at my request was to give me one Vanguard person to work with. That made it a lot simpler. I don't think Vanguard does this routinely, but they did it with me(there was a significant amount of money involved). The other point about Vanguard is that you can open a brokerage account within your IRA and buy stock, bonds, Vanguard mutual funds and many non-Vanguard mutual funds.PS. I am not associated with Vanguard in any way. But Vanguard has given me good service at a very good price. Before you move a large amount of company stock in a 401k you had better check with a "good and knowlegable" financial advisor or tax accountant. I believe there maybelittle known long term tax implications of transferring company stock in such a way. Be aware, I have found very fewtax accountants or financial advisors that know or understand this issue.
I just reread your question. I opened a new IRA and did not transfer a 401k into an existing IRA. I think for several reasons, you may want to open a separate IRA instead of transfering into an existing IRA. Just my thought. I think a new IRA would minimize complexity and future issues.
The question posed at the beginning of this Thread dealt with the ability of a participant in a 401(k) to rollover a distribution while still working for the employer. The only distributions that a 401(k) plan is legally permitted to offer to active employees from the accumulated pretax contributions account are:- on account of attaining age 59 1/2- on account of death or disability- on account of a hardship withdrawal- on account of a plan termination.If the plan permitted a participant to withdraw these contributions after age 59 1/2, they could be withdrawn and rolled over.However, hardship withdrawals may no longer be rolled over to IRAs!! The IRS Restructuring and Reform Act of 1998 provides that hardship withdrawals of pretax contributions are no longer "eligible rollover distributions". While 1999 was a transition year for this new rule, it is fully in force for distributions in the year 2000.Distributions of other money in the plan (e.g. employer contributions) can still be rolled over to an IRA if the plan permits them to be withdrawn.
In my RE "covert operations" plans I'm thinking of moving money out of some of my company's 401K plan into an existing IRA . Has anyone ever done this and is it even permitted? The work 401k is administered by Cigna so it's not as if the money's in a company account. My "non employer" IRA has a better track record and return. Any Ideas? Jim Hi Jim,Good question.I'm considering the same thing and I'll be watching the replies to your post with interest. I am not allowed to move my 401k to a Rollover IRA until I retire (pretty soon, now) and you may also have to wait till your retirement date. Also, you probably don't want to co-mingle a 401k distribution into an existing IRA (even if it is allowed), just open up a new one.No answers, but here are some things I think are relevant:A 401k usually lets you start taking distributions at without paying the 10% extra penalty at age 55. In your rollover IRA, you will have to wait till age 59-1/2 unless you want to take one of those complicated 72t early withdrawal options. If you have company stock sitting in the 401k, different rules apply, and you may be able to take just that part of it out without penalty when you leave(have a visit with your administrator). If your 401k is like many people's, it probably has a few crummy mutual funds to invest in with relatively high fees and mediocre performance. In a brokerage rollover IRA you will have wings! You can buy Spiders, Qubes, a Foolish Four portfolio, bonds, individual stocks--whatever you want. For me, the irony is that, after years of complaining about poor choices, my employer is just now adding the Vanguard Index 500 and a low-cost tech fund.In your 401k at work there is another annual administrative fee to pay (it might be buried in the statement numbers, but it is there) on top of all the other mutual fund fees. In a rollover IRA, there really is no fee except for trading fees and the time it takes you to decide what to buy--hopefully, those will be very small costs.Retirement distributions from your 401k may be controlled in some ways by your plan administrator that you may not want (e.g. monthly only with changes once a year or a big lump sum). With your own IRA, you can take it out on whatever schedule makes you and the tax guys happy.In addition to avoiding the 10% early withdrawal penalty, you want to make sure that you avoid the temporary 20% 'penalty' if you have your 401k distribution check made out to you instead of to the company that is running your rollover IRA. Your employer is required to hold back the 20% as a tax witholding unless it is transfered directly. If you forget this, you may have to go to the bank to get a short-term loan to borrow the 20% back so you can give it to your IRA holding company before the deadline. You will get this money back (minus interest) when you file the following year's taxes, but what a hassle!Have fun,-- John
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |