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What is the difference between a 401K and an IRA ?
You can rollover an IRA from one account to another at any time, but if you are a victim of a corporate layoff, or considering changing jobs or about to retire and you are thinking of rolling over or contemplating withdrawal of funds from your 401k plan, then you have several options depending on your age, provided you are no longer working for the employer providing the 401k plan.
I have been laid off from Several employers. Since my first layoff in 1985, I transferred my 401K to a Self Directed Rollover IRA and invested the money into Discounted Corporate Bonds.
http://www.ehow.com/video_4992741_accessing-contributions-emergency.html
Your 401k withdrawal options are as follows if you are under 59 ½
The above video explains if you have an emergency, what you can do with your 401K. You can take a lump sum distribution, in which case your 401k plan provider will write you a check for the value of your account less a 20% withholding tax mandated by the IRS, and a 10% withdrawal penalty. The 20% tax that is withheld, but NOT the 10% penalty, will be counted against your income tax payable or will be counted towards any refund due for the tax year when you file your tax return.
The IRS has some 401k penalty free withdrawal exceptions.
You can do nothing and leave it with your previous employer as long as the amount is greater than $5,000. Amounts less than $5,000 will usually be distributed to you, less a 20% withholding tax, regardless of you age. (Check with your plan sponsor or employer for more details.)
Your 401k withdrawal options are as follows if you are over the age of 59 ½ but under 70 ½:
If you take a lump sum distribution, in which case your 401k plan provider will write you a check for the value of your account less a 20% withholding tax mandated by the IRS. The 20% tax that is withheld will be counted against your income tax payable or will be counted towards any refund due for the tax year when you file your tax return.
You can do nothing and leave it with your previous employer as long as the amount is greater than $5,000. Amounts less than $5,000 will usually be distributed to you regardless of your age. (check with your plan sponsor or employer for more details.)
Your 401k withdrawal options are as follows if you are 70 ½ or older.
If you take a lump sum distribution, in which case your 401k plan provider will write you a check for the value of your account less a 20% withholding tax mandated by the IRS. The 20% tax that is withheld will be counted against your income tax payable or will be counted towards any refund due for the tax year when you file your tax return.
You can leave it with your employer 401k plan but start taking the required minimum distribution.
You can do nothing and leave it with your previous employer as long as the amount is greater than $5,000. In this event, you will be taxed 50% of the required minimum distribution. If the amount is less than $5,000 per 401K account, the money will usually be distributed to you regardless of your age. (Check with your plan sponsor for more details.)
No matter what, you still have to take the required minimum distribution even if you roll it over to an IRA.
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