I would like to know whether the right to make rollovers from a 401K to an IRA is provided by law. I am a few years from retirement and have a large enough 401K that I am unprepared to reinvest the total amount upon retirement. I found last year after reaching age 59.5 I can make unrestricted rollovers of any or all to an IRA. So I have been moving $20,000 each month to an IRA. By continuing this until retirement, the outstanding 401K balance will not be too large for me to handle.I expect the company to be sold this year. I am concerned that the new owners might not allow me to continue the rollovers. So is the rollover before retirement a company option or is it required by law?
Rijer asks:So is the rollover before retirement a company option or is it required by law?Those who have reached normal retirement age in a 401(k) plan may be allowed to transfer sums to an IRA under existing law while they are still employed, but they have no right to do so. That's up to the employer's plan documents.Regards...Pixy
When you quit working for a company, you have the right to roll over your 401k into an IRA.While you are working at the company, the company can decide whether or not to allow you roll over the 401k (many don't).When the startup I worked for was bought, we (eventually) had the choice of our 401ks where they were, rolling them into the new company's 401ks, or into IRAs.A word of caution... The startup I worked for did not have the 401ks set up properly. It took 18 months for the new company to get things straightened out. So for 18 months all of our 401ks were frozen (still invested, but couldn't roll them over to anything). If your current employer's HR department doesn't seem organized, you may want to have things where you want them before the sale.-Joe
….I am unprepared to reinvest the total amount upon retirement….You already have the money invested within the 401k so moving it to an IRA does not really change anything other than giving you more flexibility and possibly lower costs. What is the money invested in now in the 401K? If it is something like and S&P index fund then you could just roll into an IRA and invest in a similar fund in the IRA. Unless there are vesting or company stock issues, I would just roll it all out to an IRA now. Since you are over 59.5 years old. 401K's do have an advantage in that you can withdrawal from them without penalty starting at 55, but that does not matter in your case.I have also run into a situation where the 401K funds were frozen weeks during a merger and change of 401k administrators. In my case it was for about 6 weeks so the accountants could audit everything. Greg
I happened to think of one more potential problem with doing multiple small rollovers. That is that you increase the changes of there being a problem in processing the paperwork since each rollover probably involves your HR department, the old 401K administrator, the new IRA administrator, IRS and several pieces of paperwork and a check being mailed through the post office. The more times you do this the more chance there is there an error will occur somewhere in the process.Greg
Thanks all for the advice. I am arranging to roll over the entire balance before the buyout.While the investment choices within the 401K are reasonable, I now realize I can get a similar asset mix at a lower cost by buying assorted ETFs.
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