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Author: ScottWitherell One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121565  
Subject: What happens to your 401K after you leave? Date: 4/15/1998 5:23 PM
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What happens to your 401k if you quit your job? Does it get translated into an IRA? Or combined with the 401K program at your new job? What if your new job doesn't have a 401k?

Thanks,

Scott
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Author: vargaj Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3544 of 121565
Subject: Re: What happens to your 401K after you leave? Date: 4/15/1998 8:05 PM
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Usually you have the choice of leaving it where it is until you need it or rolling it over into an IRA. But usually there is an age requiremnt on the rollover option. Where I work you need to be 55 to rollover. So if you leave the company before 55 you get to wait a while. If the next employer has a 401k and that employer allows roll-in's then you can roll it into the new 401k. Most Fools think that you can do better in an IRA because the whole universe of investments is available to you and most Fools are better than money managers with their hefty fees. 401k are generally limited in some way as to how many choices you have. If you roll over into an IRA and think you will want to roll over into a new 401k, you must keep the money in a seperate account from all your other IRA's.

Joe Varga

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Author: KATinChicagoland Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3581 of 121565
Subject: Re: What happens to your 401K after you leave? Date: 4/18/1998 1:38 PM
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<<What happens to your 401k if you quit your job? Does it get translated into an IRA? Or combined with the 401K program at your new job? What if your new job doesn't have a 401k?>>

If the amount is small, the employer usually will require you to take a distribution so they don't have to deal with the record keeping burden of carrying your account. If the amount is large enough you have a right to have the money remain in the old employer's 401k until your reach retirement age, if that's what you want to do.

Joe indicates that usually there is an age requirement on a rollover option. I think that's incorrect. Some companies impose this requirement but most do not, in fact I think it's pretty unusual. Most companies are happy to pay you out, and it's up to you to determine whether to roll that money to a new 401k or IRA. To determine whether your employer's plan will pay out at termination of employment, you can either ask the benefits office or read the plan's "Summary Plan Description." This is a document you should have received when you joined the plan and is supposed to be available on request.

If your new employer doesn't offer a 401k or other rollover option, you'll need to roll to an IRA to maintain the tax benefits that go with qualified retirement savings. It's usually best to segregate any rollover money in a separate IRA (don't put any regular IRA contributions in the same IRA) to keep your options open for the future.

If your new employer does offer a 401k, there are advantages and disadvantages of rolling to that plan. Some of the relevant considerations are discussed in a page on my web site dealing with Roth IRA vs. Employer Plan.

Be sure to arrange a *direct* rollover so you don't have tax withheld from the amount you are rolling over.

KAT in Chicagoland
http://www.fairmark.com
Tax Guide for Investors
Includes the latest information on
Roth IRA technical corrections


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