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Both my wife and myself need to find a spot for our 401K rollovers. She quit her job and must withdraw it within 60 days. She will be staying at home with our children and not re-entering the workforce. I am no longer employed with the company that started my 401K. I can not contribute new money, although, I am not forced to withdraw my current money immediately. My new employer does not offer a 401K but they are in the process of getting a SARSEP setup. I am in the process of slowly learning about my investment options, although, I'm forced to do something within the next 30 days. Any advice?
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IMHO you may have received some bad info. 401(k) plans can not force you to take your money out; either as a taxable event, or as a rollover to a Rollover IRA. The exception to the above is the small balance regulation which permits Plans to force you to take your money out if your vested balance is less than $3500. If your respective balances are greater than $3500, then you can leave your money right where it is. It is your choice, not the Plan's choice.

That being said, there are numerous financial and psychological reasons for a terminated employee to want to get there money out & put it elsewhere & under your own direct control.

IMHO, the best move is to open a pair (one for you, one for your wife) Rollover IRA accounts at the discount brokerage of your choice. Then you are free to invest in the stocks, bonds, mutual funds of your choice.

I would modify the above, if per chance either one of you worked for small (benevolently oriented) employers that have some special investment options, such as private investment trust that performs excellently & the employer is picking up the trust management expenses; e.g. the plan currently offers an excellent investment vehicle that would be unavailable to you if you take your money out.

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Greetomgs. BrettJones, and welcome. You wrote:

<<Both my wife and myself need to find a spot for our 401K rollovers. She quit her job and must withdraw it within 60 days. She will be staying at home with our children and not re-entering the workforce. I am no longer employed with the company that started my 401K. I can not contribute new money, although, I am not forced to withdraw my current money immediately. My new employer does not offer a 401K but they are in the process of getting a SARSEP setup. I am in the process of slowly learning about my investment options, although, I'm forced to do something within the next 30 days. Any advice?>>

Advice? No. The choices as to what you do with that money are up to you. However, both you and your wife may transfer your old 401k money to your own IRAs. Any mutual fund, broker, bank or insurance company (it depends on what you wish to use as an investment vehicle) can help you do that. Just contact the one of your choosing and tell them what you wish to do. They along with each of your plan administrators will guide you through the process. You should specify that you want the money transferred directly from the plan custodians to the custodians of each of your IRAs. Don't worry because they all know how to do that. Just follow their instructions, and you will encounter no problems. This direct transfer totally eliminates any potential hassles you might otherwise have with the tax man.

One other thing: If either of you thinks that at any time in the future you may wish to transfer that money to a new employer's 401k, then ensure the IRAs you establish are separate and distinct from all other IRAs. Also, do not make any other contributions to those IRAs. In so doing, you may later transfer that money and all its earnings to a new employer's plan that accepts rollover money from an old employer's plan.

Regards….Pixy
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TheBadger sez:

<<IMHO you may have received some bad info. 401(k) plans can not force you to take your money out; either as a taxable event, or as a rollover to a Rollover IRA. The exception to the above is the small balance regulation which permits Plans to force you to take your money out if your vested balance is less than $3500. If your respective balances are greater than $3500, then you can leave your money right where it is. It is your choice, not the Plan's choice.>>

Just as a point of clarification here, the amount for a forced distribution was changed to $5K as of July or August, 1998.

You're making some excellent posts. Thanks for the assist. It makes my job that much easier. :-)

Regards....Pixy
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Tx. But I was under the assumption that an IRA as the target of my 401K would be limiting as to the amount I could invest. I am early 30s and the 401K was doing great. I was planning on doing a ROTH and then depositing approx. 10-15K a yr. via my employers SARSEP. My concern is losing the cumulative affect of my money by starting over in the SARSEP.
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BrettJones sez:

<<Tx. But I was under the assumption that an IRA as the target of my 401K would be limiting as to the amount I could invest.>>

As far as annual contributions, yes. Those are limited to $2K per year maximum. There is no limit on the amount you may transfer from a qualified retirement plan like a 401k.

<< I am early 30s and the 401K was doing great. I was planning on doing a ROTH and then depositing approx. 10-15K a yr. via my employers SARSEP. My concern is losing the cumulative affect of my money by starting over in the SARSEP.>>

Nothing says you still can't do all of that. You may leave the 401k money where it is or you may transfer the 401k money into the SARSEP if you wish. Just understand that when you do the latter, then you can no longer transfer any of that 401k money to a new employer's qualified retirement plan in the future.

Regards….Pixy
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