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401K Rollover
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A 401K Rollover is how
you continue to benefit from the tax-deferred growth of earnings being
provided by your current 401K plan. This Direct Rollover can occur when
you change jobs or retire, and will allow all of your 401K plan assets
to continue to accumulate on a tax-deferred basis until you begin your
retirement distributions.
If you need some money from your 401K Rollover, you can take some or all
of it, but your employer will withhold 20% of the amount of the
distribution for taxes. You may also still owe federal income taxes, and
depending on where you live, state income taxes may be withheld as well.
In addition, if you are under the age of 59 ½, you may have to pay a 10%
penalty for early withdrawal. Therefore it is not advised to take cash
distributions from your 401K Rollover, unless it is absolutely
necessary.
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Processing a 401K
Rollover is simple. You simply open an IRA Rollover account with a new
company of your choosing. Banks and Mutual Fund companies can open this
account for you. The next step is to send your old employer a completed
form called a “Distribution Request” form. Make sure you request a
Direct Rollover. If you did not receive this form when you left your
previous employer, call your previous Employers Human Resources
department and ask them to send you one. Once your employer receives
your completed distribution request, they will distribute the check to
you or the new Bank or Mutual Fund Trustee. If they send the check to
you, send it to the new IRA Rollover Trustee immediately.
According to the Social Security Administration, 401k savings will
provide one-third of your income during retirement, which is why you
should continue to keep your 401K Rollover fully invested.
Your 401K Plan gave
you a powerful benefit--tax-deferred growth of earnings. When you
rollover your 401K to an IRA Rollover account, you get to continue
the tax deferral benefit. And, since you do not need to pay income
taxes on any potential gains earned by your IRA Rollover accounts
until you withdraw them at retirement, your retirement savings can
grow faster than a regular taxable account.
Please choose from the
list of topics for additional information:
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