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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
"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?


If you are at least 59 1/2 you can roll it OUT of the 401k for about 15% and if 65, about 12% total tax in a Lump Sum Distribution. Does that compare favorably with your tax bracket where the mandatory withdrawals will be when your 70 1/2? After the distribution, you pay no taxes on the net amount, but you'll pay taxes on any income after the distribution whereas the IRA would continue without taxation until you take it out. It depends on whether you 'll need the money to live on before the first tax free step-up at death. Ed
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