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Monday, February 14, 2011

401k Rollovers

Yahoo Finance has an excellent article this morning for DIY investors on how to rollover a 401k. Like many things in personal finance, it is something most people will do, possibly several times (it must follow a definite process), and not doing it right can be costly. I recommend the article be printed and saved to read in the future when the time comes.

The essentials are to be sure you have an IRA account opened up first, do a trustee-to-trustee transfer, and, if you have company stock, consult a financial advisor before doing the transfer. Sometimes considerable taxes can be saved by transferring the company stock to a taxable account. Again, consult an advisor.
I recommend transferring the assets in kind so that you aren't subject to the risk of being out of the market. This typically takes a couple of weeks and you don't want to be in cash for a couple of days when the market is on a tear.

Also, if you will need or want the money before you turn 62, consult an advisor. Some plans allow withdrawals before then without having to pay a 10% tax penalty.
Posted by Robert Wasilewski at 8:04 AM
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5 comments:

  1. The GrouchFebruary 14, 2011 at 8:15 AM

    Thanks for the reference. I'm just about to do this.

    ReplyDelete
  2. DIY InvestorFebruary 14, 2011 at 8:33 AM

    It will be a cinch for you. The only tricky part is if you have company stock. If so google "net unrealized appreciation" to get further details on transferring company stock to a taxable account and avoiding the tax you'd pay when you take it out of an IRA. This is one that sometimes people mess up on and it costs them.

    ReplyDelete
  3. The GrouchFebruary 14, 2011 at 8:42 AM

    I'm going to put what little company stock I have in other investments before I do the transfer to make the process simpler.

    ReplyDelete
  4. Robert WasilewskiFebruary 15, 2011 at 7:25 AM

    As long as it isn't many shares and the cost basis isn't low you'll be alright.

    ReplyDelete
  5. AnonymousJuly 30, 2011 at 10:29 PM

    >> I recommend transferring the assets in kind so that you aren't subject to the risk of being out of the market. This typically takes a couple of weeks and you don't want to be in cash for a couple of days when the market is on a tear.

    Fidelity insists this cannot be done, they must get a check from the 401k. My side of is that I don't want to be out of the market, this undermines qualified retirement plan portability. Should I be dealing with some other firm?

    ReplyDelete

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