What happens if I decide to roll my 401(k) over to an IRA (individual retirement account)?
Rollover to an IRA ensures your money will continue to be sheltered in a tax-deferred account, and you will avoid the 20% federal withholding and any early withdrawal penalties that would result from taking the 401(k) proceeds as a lump-sum distribution. You can withdraw money as you need it, subject to the IRA minimum distribution rules, and pay income tax only on the amount you withdraw. If you do not plan to later move your assets into a new employer’s 401(k) plan, you do not have to worry about keeping your 401(k) money separate from your traditional IRA (you can commingle the funds). While new rules allow you to move your 401(k) funds into a new employer’s plan even after the money has been commingled with your traditional IRA, it might be a good idea to keep the money separate to avoid difficulties. In this case, simply open a new traditional IRA specifically for the purpose of rolling over your 401(k), if the plan allows it. To initiate the rollover, submit a distribution reques
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