Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
>> Complete fool here new to the ways of the IRS. >>

If your were a fool you wouldn't be here. Since you ae you are a Fool, not a fool. (g)


>>Can someone transfer out of their 401k with a
company (say they quit) to an IRA set up at a discount brokerage ? Is this done without penalty ? >>

Absolutely. When your former plan is ready to make your distribution they will provide you with a form on whcih you elect how to take your distribution. You will want to elect a "direct rollover". It will firther ask you where the receptacle account for the direct rollover is. You will indicate that it is your IRA account. They will then send it there automatically. Obviously for this to work you have to have already set up the IRA. This is a completely tax-free transfer.

>>As I understand it an IRA has a $2000 limit for the amount you can discount from your yearly income, as opposed to a 401k which is upto 15% of your income .... is there another simple mechanism outside of a corporation which allows for a better tax shelter...>>

It depends on your situation. If you are working for someone else then hopefully they will have a 401(k) that you can participate in. If you are self employed there are a variety of plans that will allow you to make tax-deducitble contributions, including SEPS, SIMPLEs, Keough's (profit sharing, money purchase and defined benefit). Which plan makes sense for you will depend on your particular circumstances.

Rich
Print the post  

Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement