like say you quit and disappear from the workforce for six months... whereupon you get a new job with a new plan. i guess you roll your old plan into that of your new place, but what happens during that six month inbetween time, what do you have to do/should do?
what happens to 401k stuff if you quit?
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I think most companies have "vested" amounts you earn, the longer you work there, for the amount they may contribute. Not all companies contribute though. I was 70% vested at a previous employer so if THEY contributed $1,000 then I got to keep $700 in addition to what I contributed.
After quitting I had the option of leaving it in the account, which I did, or rolling it into another plan. At another job I had as a teen, I took the cash payout for the small plan they had. I took a beating on penalties and taxes.
After quitting I had the option of leaving it in the account, which I did, or rolling it into another plan. At another job I had as a teen, I took the cash payout for the small plan they had. I took a beating on penalties and taxes.
hi, so after quiting you actually have the option of 'leaving it in' and it'll do it's interest collecting for you as usual, until you find a new job + plan to 'roll it' into....???
as rmblam said, you can basically do what you want with what you're owed. i was 90% vested when i left and just rolled it over to an IRA account to buy stocks with. if you withdraw it, you'll have to pay heavily on early withdrawal penalties.
<< hi, so after quiting you actually have the option of 'leaving it in' and it'll do it's interest collecting for you as usual, until you find a new job + plan to 'roll it' into....??? >>
By default it stays until you decide what to do with it. The company stops contributing though, of course. How it generates or loses money (stocks) depends on how you invested it.
Once you have a new plan, then they will have a form you can fill out to roll the old plan into it if you wish.
hi folks, so there are 2 options it seems?:
1. quit, employer's contribution stops, leave the existing funds to do what it does.....then->
new job/roll it into new plan
2. quit, employer's contribution stops, roll into an IRA (traditional/ROTH)....... then ->
new job/roll this IRA into a new plan
If so, then one who chooses option 2 believes the IRA will have a better return?
1. quit, employer's contribution stops, leave the existing funds to do what it does.....then->
new job/roll it into new plan
2. quit, employer's contribution stops, roll into an IRA (traditional/ROTH)....... then ->
new job/roll this IRA into a new plan
If so, then one who chooses option 2 believes the IRA will have a better return?
Not necessarily. There are many levels of investing: Safe to risky (low yield to higher yield). Money Market to Stocks.
IRA or 401K. It's all in how the money is managed.
Roth Basics: http://www.nb.com/knowledge/home/home/
The key difference between traditional IRAs and Roth IRAs is taxation: Contributions to a traditional IRA can be deductible, but withdrawals from the account are taxed as income. On the other hand, contributions to a Roth aren?t deductible, but withdrawals are tax-free. This includes not only your contributions, but also any capital gains, dividends or interest earned in the account.
To withdraw money tax-free from a Roth, the investor must be age 59 ½ or older and the Roth must have been open for at least five tax years from the initial contribution. Exceptions to these requirements may apply in cases of death, disability, or first-time purchase of a home.
Total combined contributions to both traditional and Roth IRAs cannot exceed $2,000 per individual per year, but with a Roth, the amount you can invest dips as income increases.
401k http://www.uslaw.com/vsimplify/401k.htm#401kFAQ
I can contribute up to $10,000 pretax annually into my 401k while my employer matches up to 6%. There are different rules for withdrawals also.
IRA or 401K. It's all in how the money is managed.
Roth Basics: http://www.nb.com/knowledge/home/home/
The key difference between traditional IRAs and Roth IRAs is taxation: Contributions to a traditional IRA can be deductible, but withdrawals from the account are taxed as income. On the other hand, contributions to a Roth aren?t deductible, but withdrawals are tax-free. This includes not only your contributions, but also any capital gains, dividends or interest earned in the account.
To withdraw money tax-free from a Roth, the investor must be age 59 ½ or older and the Roth must have been open for at least five tax years from the initial contribution. Exceptions to these requirements may apply in cases of death, disability, or first-time purchase of a home.
Total combined contributions to both traditional and Roth IRAs cannot exceed $2,000 per individual per year, but with a Roth, the amount you can invest dips as income increases.
401k http://www.uslaw.com/vsimplify/401k.htm#401kFAQ
I can contribute up to $10,000 pretax annually into my 401k while my employer matches up to 6%. There are different rules for withdrawals also.
Your options depend on how much you have in the 401k account at the time you leave the company. I don't remember the minimum, and I think that each company can set theirs, but I believe that you need either $3500 or $5000 in the account at the time you separate from your employer to leave the money where it is. If you have an employer match, you keep some or all of your employers contribution based upon your companies vesting schedule.
If you decide to take the money out of the account, you pay an immediate 10% penalty and the entire amount counts as untaxed income at the end of the year and is subject to federal and state income tax.---BAD CHOICE---
If you do not have the minimum amount in the account, you can roll it to a rollover ira account. You can open this account with any brokerage such as Fidelity, or Schwab, or Etrade. This account can be rolled to your new employers 401k plan, or you can maintain the rollover account by itself. The beauty of this is that most company plans have $hitty investment options. The rollover account gives you more contol over where you invest the money, stocks or mutual funds, etc.
A Roth IRA is a totally different animal altogether...if anyone is interested, let me know and I will explain how it works...hope this helps
If you decide to take the money out of the account, you pay an immediate 10% penalty and the entire amount counts as untaxed income at the end of the year and is subject to federal and state income tax.---BAD CHOICE---
If you do not have the minimum amount in the account, you can roll it to a rollover ira account. You can open this account with any brokerage such as Fidelity, or Schwab, or Etrade. This account can be rolled to your new employers 401k plan, or you can maintain the rollover account by itself. The beauty of this is that most company plans have $hitty investment options. The rollover account gives you more contol over where you invest the money, stocks or mutual funds, etc.
A Roth IRA is a totally different animal altogether...if anyone is interested, let me know and I will explain how it works...hope this helps
patrickj, hi.
so in essence when you execute a rollover there's no cost/penalty incurred, and in a rollover there's no point inthe process where you are 'taking out' your funds (which initiates those penalties you speak of).
so in essence when you execute a rollover there's no cost/penalty incurred, and in a rollover there's no point inthe process where you are 'taking out' your funds (which initiates those penalties you speak of).
ddgoos, indeed perhaps a roth ira is the best thing to do, roll what i have into it that is, but far as i know, roth iras have a cap of about 2000 bucks per tax year, so if i am sitting on something more than 2000, like 3000 for simplicities sake, what can one do.
also, say once i do roll 2000 into an IRA ROth, and then as others suggest, when a new employer/plan is found, to roll the IRA into it.... isn't that an instance of early withdrawal of an IRA which is penalized by the feds?
also, say once i do roll 2000 into an IRA ROth, and then as others suggest, when a new employer/plan is found, to roll the IRA into it.... isn't that an instance of early withdrawal of an IRA which is penalized by the feds?
dukdukgoos:
<< Roll into a Roth IRA. That's the best way to go. Tax-free at retirement time. >>
The tax free at retirement part is true, however, if you were to roll your 401k into a Roth IRA, you would be
co-mingling pretax money with after tax money. This would probably be considered a conversion and be a taxable event. I rolled money into a Roth the first year that the Roth was available, and had to pay tax on the money at normal income tax rates. Better to roll this money to a roll-over IRA. I know that some changes are coming in the new tax law that may change this, but until that time, you do not want to mingle pre-tax (401k) money with after tax money (ROTH IRA)
abc:
<< so in essence when you execute a rollover there's no cost/penalty incurred, and in a rollover there's no point inthe process where you are 'taking out' your funds (which initiates those penalties you speak of). >>
That is correct...one of two things will happen when you do the rollover. The administrator of your 401k will process all of your paperwork. Once this is complete, the fund company will forward a check to you or to the company where you opened your roll-over IRA account. It helps if you open the roll-over IRA first so that you can provide the account number and mailing address for your new account. If the check is sent directly to the roll-over account you should be all set. If the check is sent directly to you, endorse it and add "for deposit only" above your endorsement and send it to the manager of the new account. This is not considered a distribution because you are moving the money to a qualifying account and not taking posession of it. I use Fidelity, and they have a service called roll-over express, but you should decide for yourself who to use. Fidelity, Schwab, and Etrade seem to be geared toward investors that have some "do it yourself". I would also look to see which of the major money managers have mutual fund options that you are comfortable with. Keep in mind that this process can take up to 60 days to complete and that your cash is not accessible during the process. One reason I have used Fidelity is that the process has taken less than 30 days each time I have rolled money into my roll-over account.
Hope this helps...
<< Roll into a Roth IRA. That's the best way to go. Tax-free at retirement time. >>
The tax free at retirement part is true, however, if you were to roll your 401k into a Roth IRA, you would be
co-mingling pretax money with after tax money. This would probably be considered a conversion and be a taxable event. I rolled money into a Roth the first year that the Roth was available, and had to pay tax on the money at normal income tax rates. Better to roll this money to a roll-over IRA. I know that some changes are coming in the new tax law that may change this, but until that time, you do not want to mingle pre-tax (401k) money with after tax money (ROTH IRA)
abc:
<< so in essence when you execute a rollover there's no cost/penalty incurred, and in a rollover there's no point inthe process where you are 'taking out' your funds (which initiates those penalties you speak of). >>
That is correct...one of two things will happen when you do the rollover. The administrator of your 401k will process all of your paperwork. Once this is complete, the fund company will forward a check to you or to the company where you opened your roll-over IRA account. It helps if you open the roll-over IRA first so that you can provide the account number and mailing address for your new account. If the check is sent directly to the roll-over account you should be all set. If the check is sent directly to you, endorse it and add "for deposit only" above your endorsement and send it to the manager of the new account. This is not considered a distribution because you are moving the money to a qualifying account and not taking posession of it. I use Fidelity, and they have a service called roll-over express, but you should decide for yourself who to use. Fidelity, Schwab, and Etrade seem to be geared toward investors that have some "do it yourself". I would also look to see which of the major money managers have mutual fund options that you are comfortable with. Keep in mind that this process can take up to 60 days to complete and that your cash is not accessible during the process. One reason I have used Fidelity is that the process has taken less than 30 days each time I have rolled money into my roll-over account.
Hope this helps...
patrickj many thanks, it's becoming alot clearer to me. Um, what do you think about what I wrote with regards to there being a limit to how much you can roll into a ROTH IRA, which actually at this point I should be rolling into a traditional IRA or, now it seems, there are IRAs called "Rollover IRAs"? Any cap on those would anybody know.
<< it's becoming alot clearer to me. Um, what do you think about what I wrote with regards to there being a limit to how much you can roll into a ROTH IRA, which actually at this point I should be rolling into a traditional IRA or, now it seems, there are IRAs called "Rollover IRAs"? Any cap on those would anybody know. >>
There is no limit on what you can roll into a ROTH IRA or a roll-over IRA. A limit would kind of defeat the purpose of allowing you to roll the money if you couldn't roll it all. There are many types of IRA's. The roll-over is used to move pretax retirement money (401k, 403b) to a temporary holding place. That place is the roll-over IRA. A traditional IRA allows you to add after tax money, but requires you to pay tax on the money when you start withdrawing at retirement. The ROTH IRA allows you to put after tax money away and never be taxed on it when you withdraw at retirement. The ROTH also allows you to withdraw up to $10k in principal (after tax contributions, but not earnings) without penalty or tax liability for things such as first time home purchase, tuition, medical emergency, and I think a few other reasons.
To summarize, there is no cap on a rolloever. You're not adding new money, just changing the container that it is held in. Traditional IRA's and ROTH IRA's have limits on how much you can contribute each year. These limits are also based on your income. They don't kick in until you are making over 100k, and you can always max your 401k out.
<<
<< it's becoming alot clearer to me. Um, what do you think about what I wrote with regards to there being a limit to how much you can roll into a ROTH IRA, which actually at this point I should be rolling into a traditional IRA or, now it seems, there are IRAs called "Rollover IRAs"? Any cap on those would anybody know. >>
To summarize, there is no cap on a rolloever. You're not adding new money, just changing the container that it is held in. Traditional IRA's and ROTH IRA's have limits on how much you can contribute each year. These limits are also based on your income. They don't kick in until you are making over 100k, and you can always max your 401k out. >>
for last year's tax season i put only 2k into a ROTH IRA, I am not making over 100k, I thought 2k was the limit, could i have put in more?
secondly, then it's clear that an IRA that is a rollover is treated as a totally different animal by the powers that be, from any other which you establish on your own.
if i haven't 'maxed out' my 401 for this year, can i merely say i wish to come monday, and allocate the amount of funds I wish to get the 401 maxed out, does it work like that?
<< for last year's tax season i put only 2k into a ROTH IRA, I am not making over 100k, I thought 2k was the limit, could i have put in more?
secondly, then it's clear that an IRA that is a rollover is treated as a totally different animal by the powers that be, from any other which you establish on your own.
if i haven't 'maxed out' my 401 for this year, can i merely say i wish to come monday, and allocate the amount of funds I wish to get the 401 maxed out, does it work like that? >>
I believe that the 2001 limit on a ROTH is $2000, so you are fine there.
Not sure I understand the second question exactly, but a roll-over IRA is separate and does not have the contritubution limits that the traditional and ROTH IRA have.
It would depend on how your 401k is set up, however, since the money comes out of your payroll check, you would need an additional payroll for the 401k contribution to come from. You could increase your 401k contribution % for the new year so that you are able to max for 2002.
is say fidelity particularly good for doing a rollover account with? or is there another company that is more worthwhile?
My experience is with Fidelity. I know people that use Schwab and Etrade. I use Etrade for my retail (non-retirement) brokerage account. I would suggest going to each of their websites and taking a look around. Once you have done that, you might want to call each of the three (or more if you add someone to the list) and tell them what you are planning on doing. After you talk to the representatives, make your decision on who was the most knowledgeable, which answered the call the fastest, who had the nicest people on the phone, and who (if anyone) tried to pressure you. Once you have called each brokerage, you'll probably have an especially good feeling about one over the others. That is the company that you should do business with. Its important that you are comfortable with whoever has your money.
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