Why is it important to directly roll money distributed from a 401(k) account to a IRA?
By directly rolling over money from your 401(k) into a IRA, you preserve the tax-deferred status of your retirement money. If you were to take your retirement savings directly from the 401(k) plan as a lump sum distribution you would be subject to a mandatory 20% witholding and the money distributed from your 401(k) savings would be considered taxable income and penalties may apply if you are under 59 ½ .
