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My wife quit her job of 14 years last December. She has about $50K in a 401(k) plus some in a state-run retirement account.

First, I looked up something on the FAQ/Notes for Retirment Investing that said:
"State and local governments are prohibited from offering 401(k) plans to their employees. This was once true of private, tax-exempt employers as well; however, as of January 1, 1997, the latter may now establish a 401(k) plan for their qualified employees."

Well, both my wife and I have 401(k)'s as employees of city governments. Why does the FAQ say this?

Second, what are the pros/cons for rolling over her 401(k) into an IRA?

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