Liquidating rollover 401 k
They do it to secure their financial futures and to take advantage of some nifty tax benefits.
What might be harder to understand is why anyone would take money out of their 401(k) before they retire.
If you’re changing jobs, you can roll your old 401(k) account assets into your new employer’s plan (if permitted).
This option maintains the account’s tax-advantaged status.
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You will have greater flexibility over access to your savings (although income taxes may apply, along with early withdrawal penalties, if you are under age 59½).Taking an early withdrawal from a retirement account — or taking cash out of the plan before you reach age 59½ — can trigger income taxes on the amount, along with a penalty.At the end of the year, the plan administrator issues a Form 1099-R reporting the distribution, sending a copy to you.Find out if your new plan accepts rollovers and if there is a waiting period to move the money.Also, review the differences in investment options and fees between your old and new employers' 401(k) plans.