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I don't understand why someone can't roll the 401K money into an IRA. I did it 6 years ago without a problem and was planing to do it again when I leave this job. It had to be a rollover IRA and the money had to be sent directly to the IRA not to the employee to avoid a 20% withholding. If you have the 20% withheld you need to come up with that money too or get a penalty for early withdrawal. The 20% is not your tax it would be much more so you should roll it over.

All that you say applies, but only to pretax contributions, company contributions, and the earnings on all contributions to a 401(k). What the original poster was dealing with was the question of what would happen to the post-tax contributions in a 401(k). In your case, you probably had made no post-tax contributions to your 401(k), so you didn't encounter this situation.

I performed a 401(k)-to-IRA rollover in 1998, and as I had expected, I received a check from the 401(k) administrator for the total amount of all post-tax contributions I had made. This money can come in handy, because it can be invested and ultimately result in long-term capital gains, which are taxed at a lower rate than IRA withdrawals.

Hope this helps,
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