72(t) Question *When Do I Have To Roll 401-k Into IRA ?
L1: 72(t) Question *When Do I Have To Roll 401-k Into IRA ?I posted here a couple years ago when I was going through a terrible time @ work & felt the need to quit early & start the 72(t)
Luckily for me, things improved shortly after, & I was able to hang in there, get my 30 years in, & retire last month.
It doesn’t appear that I’ll ever have to use the 72(t) but just in case, I have one important question. Since I retired at 53, I’m going to be responsible for my healthcare costs for the next 12 years. Because of that, I want to be sure I keep the option of using SEPP 72(t) in the future
My 401-k is at Vanguard.
I leave the 401-k exactly ‘as is’.
3 years down the road, for whatever reason, I need more income.
Would I be able to roll it into a small existing IRA I have @ Fidelity & begin the SEPP 72(t) ?
Or do I have to roll into an IRA now ?
PS: I’m going to call Vanguard later today2015-07-14 18:43, By: Steve, IP: [22.214.171.124]
L2: 72(t) Question *When Do I Have To Roll 401-k Into IRA ?You can roll it to a new or existingIRA now or later. Since you separated prior to the year you will reach 55, that penalty exception for direct plan distributions will not be available. But you can still wait to do the IRA direct rollover and start the 72t plan with the IRA then. I would NOT attempt to start a 72t plan directly from the 401k because there are too many pitfalls with that approach.2015-07-14 19:38, By: Alan S, IP: [126.96.36.199]
L3: 72(t) Question *When Do I Have To Roll 401-k Into IRA ?Thank You Alan2015-07-14 19:55, By: Steve, IP: [188.8.131.52]
L4: 72(t) Question *When Do I Have To Roll 401-k Into IRA ?Alan S- Can you comment on any differences between movingthe 401 by rollover to new IRA, vs. commingling it into an existing IRA that was not created by another rollover from a retirement plan, in terms of creditor protections, etc. I know the laws changed recently, but isn’t there still better creditor protection for an IRA that is totally from a retirement plan rollover? IT may help Steve with his decision if there is a difference. I think you can also roll the IRA back into a 401k with a new employer if you choose to do that down the road if it is kept separate and properly titled as such. KEN2015-07-14 20:21, By: Ken, IP: [184.108.40.206]
L5: 72(t) Question *When Do I Have To Roll 401-k Into IRA ?Hi Ken.
With respect to creditor protection, it all depends on the particular state statutes. The majority of states provide complete protection, but there are some that do not and that results in which components of the federal bankruptcy Act of 2005 the state observes or have opted out of. For states that use the Act, IRAs are protected in bankruptcy up to an inflation adjusted amount of around 1.2 million, however rollover IRAs are not subject to a dollar limit. Therefore, if the IRA in total is not expected to ever exceed the inflation adjusted limit, the rollover can be done into an existing IRA. Otherwise, in those states the rollover should be done into a new rollover IRA. Therefore, the OP should check into the statutes ofthe specific state. As a reminder, none of these creditor protections are applicable to IRS liens or marital settlements, which are really the leading creditor threats. Also, state statutes not using the federal Act are effective without a BK filing, while the federal Act requires a BK filing in certain federal or other tax court systems.
Finally, with respect to rolling IRAs into accepting employer plans, some plans accept all pre tax IRA dollars while others only accept rollovers from rollover (aka conduit) IRA accounts. Therefore, keeping the rollover IRA separate improves the chances of doing a subsequent IRA to employer plan rollover after any SEPP has been completed.2015-07-14 23:12, By: Alan S, IP: [220.127.116.11]
L6: 72(t) Question *When Do I Have To Roll 401-k Into IRA ?If Vanguard has done a good job with your investments, why would you want to make this transfer to Fidelity ? Vanguard is the largest mutual fund family in the world, and the most experienced with SEPP 72-T plans if/when you might need that approach. Until then, they have the most mutual funds and EFT funds in the world, in addition to being the largest.2015-07-15 02:02, By: dlzallestaxes, IP: [18.104.22.168]