When you have a 401k plan and leave the company it is with, there are two things you must consider about rolling over you 401k plan. First, some employers don’t care if you keep the plan with their company, but they will start charging your account a fee to maintain it each month. Second, if you do not roll it over in the required time frame or cash it out with the intent of investing later you will be hit with steep fees, penalties and taxes.
Will I pay taxes if I don’t roll over my 401k plan?
Yes! And you will not only pay taxes on the entire amount of the plan you will pay an additional 10% early withdrawal fee imposed by the government. The investment house and your former employer may also have fees attached to the plan that penalize you for early withdrawal. It is important that you check how much time is allowed to transfer your plan. Normally you have 60 days from termination.
Do I roll over my 401k when I leave employment?
When you are no longer employed with the plan holder you have 60 days to roll over your account without penalty. If you are not currently employed establish an independent account. Once that is established request from your former plan holder and new plan holder the correct forms to have the plan transferred automatically. By allowing the brokerage to do this, instead of yourself, you will avoid any penalties for early withdrawal. They will do this at no charge to you and you will not incur any taxes or fees for the transfer.