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Greetings, Wepattillo, and welcome. You wrote:

<<Here is a Foolish question that is probably on the minds of other aging boomers. I'm retired from my previous employer but working at a "new" career. I am not yet 59-1/2. My previous employer's 401k plan allows me to maintain my (now inactive) account there and I have done so. The investment choices are not that bad, but I'm reviewing some options and may want to move some or all of that money to gain flexibility. The balance is (in round numbers): Employee pre-tax (401k) $23,800; Employee after tax $18,800; Employer match $29,000; and roll-over balance (lump sum from defined benefit plan) $28,400 = total $100,000.

Am I correct that, with care, at least some of these funds may be rolled elsewhere? (segregated to retain the tax status) For example, the 401k, the employer match, and the roll-over portions could go into a rollover IRA? Also, what about that "after tax" portion? I can leave that part where it is to continue to grow tax deferred, but are there other options for this part? I know that withdrawal at this point would not be wise...>>


As a former employee, you may transfer your 401k money to an IRA of your choice without incurring any income tax bill. Be aware, though, that many plans will not permit a partial distribution of your account. Therefore, if you wish to transfer just "some" money, you may be told you have to transfer "all" of it or none. Your 401k plan administrator can tell you what you can do in your case.

During the transfer, the part of the distribution attributable to your after-tax contributions will be sent to you. It cannot be transferred to an IRA. The rest of the distribution will be sent to the IRA specified by you. The check you get for the after-tax contributions is yours to keep and do with as you wish. No income tax is due on that money. If you arranged for a direct transfer of all the rest (i.e., your pre-tax contributions, the employer matching contributions, and all earnings), then there will be no taxes due or any withholdings on that money, either. To avoid any tax problem on the latter, you should specify you want all of the pre-tax money transferred directly from the plan to the IRA. Both the plan custodian and the IRA custodian know how to do this, so all you have to do is tell them what you want and follow their instructions.

Regards….Pixy
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