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All in all, excellent advice from Wendy.

2. The 401(k) plan at my last company had inferior returns, and high expenses. I rolled it over to a Fidelity IRA as soon as possible. As someone else mentioned, it is essential to make this a custodian-to-custodian transfer. Do NOT have them send a check to you! The benefits people sent me a check erroneously, and I immediately sent it back and told them to do the rollover correctly. Even if you transfer the money to the IRA within the 60-day deadline, the mere fact of receiving a check could trigger a problem, since the 1099-R won't say "Rollover" -- and that's what the IRS sees.

That's not the reason why you want to insist on a direct custodian to custodian transfer. Miscodings on a 1099-R are easy to deal with. The REAL problem is that if they cut you a check, they must withhold 20% as a tax payment. You have to make up that 20% when you deposit the funds in the new account or else you have taken a distribution of 20%. This distribution will be subject to regular tax and an early distribution penalty if you are under age 55 1/2 (different from IRA age limits).

Ira
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