6 Answers to Key 401(k) Questions

how to roll over 401

I have moved from ca to oregon, how do I roll over my 401k to my new employer

kim of OR @ Jun 03, 2009 10:43:52 AM

take control of your money

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daqimo of ID @ Apr 14, 2009 16:00:39 PM

I'm leaving my job. What should I do with my 401k

This is terrible advise. Leaving it with your old company is a bad idea on a few levels. Your old company may pass on administration costs to you that it had previously absorbed.

More important is what happens to the 401k if something should happen to you. If you are married and you die it goes to your spouse. If something were to happen to your spouse before he or she had a chance to roll it to an IRA it would be paid out to their heirs and taxed. If you are not married and you die it is paid out to your heirs and taxed. This tax could be considerable. If you don't mind making Uncle Sam your major heir and you don't mind paying administration fees by all means leave it in the old company's 401k.

There is an added advantage of rolling it to an IRA. The stretch option. Same scenario. No spouse, you die. In an IRA RMDs would start immediately upon your death. The payments would be based on your life expectancy. If your children or heirs know about the stretch option they can take those RMDs based on THEIR life expectancy. Since this would be a much smaller annual payout the balance of the account value would continue to grow tax deferred for their lifetime. This could provide the basis for wealth for future generations. Think aboout it. If your heirs are in their 30s when you die that would give them 30 more years of tax deferred growth. Compare that with cutting it in half to pay Uncle Sam.

Frank Gusmano of NY @ Mar 04, 2009 17:08:38 PM

I'm leaving my job. What should I do with my 401k

This is terrible advise. Leaving it with your old company is a bad idea on a few levels. Your old company may pass on administration costs to you that it had previously absorbed.

More important is what happens to the 401k if something should happen to you. If you are married and you die it goes to your spouse. If something were to happen to your spouse before he or she had a chance to roll it to an IRA it would be paid out to their heirs and taxed. If you are not married and you die it is paid out to your heirs and taxed. This tax could be considerable. If you don't mind making Uncle Sam your major heir and you don't mind paying administration fees by all means leave it in the old company's 401k.

There is an added advantage of rolling it to an IRA. The stretch option. Same scenario. No spouse, you die. In an IRA RMDs would start immediately upon your death. The payments would be based on your life expectancy. If your children or heirs know about the stretch option they can take those RMDs based on THEIR life expectancy. Since this would be a much smaller annual payout the balance of the account value would continue to grow tax deferred for their lifetime. This could provide the basis for wealth for future generations. Think aboout it. If your heirs are in their 30s when you die that would give them 30 more years of tax deferred growth. Compare that with cutting it in half to pay Uncle Sam.

Frank Gusmano of NY @ Mar 04, 2009 17:08:33 PM

BE YOUR OWN ECONOMIC HERO

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Jim Campbell of CA @ Feb 26, 2009 13:07:45 PM