L1: IRA RolloverI lost my job to foreign trade and will be receiving my 401k next month. I have a small IRA and wonder if I can roll this IRA in with my 401K?2008-08-12 07:46, By: lu, IP: [188.8.131.52]
L2: IRA RolloverYes, you can roll over a 401-K into an IRA.
However, what is your age ? If youare, or will be, 55 or olderin 2008, then it might be better not to roll it over because you might be able to take distributions without the 10% penalty for distributions before age 59 1/2.2008-08-12 08:06, By: dlzallestaxes, IP: [184.108.40.206]
L2: IRA RolloverI am 52 and will be requesting the 72t.2008-08-12 08:08, By: lu, IP: [220.127.116.11]
L2: IRA RolloverCan I take the small IRA I have and put it with my 401K into an IRA and request the 72t?2008-08-12 08:12, By: lu, IP: [18.104.22.168]
L2: IRA RolloverYes, but you may not understand what the process is. I don”t know who you think you are “requesting a72T from”. What happens is that you contact a financial institution, broker, mutual fund company, etc. You ask them if they are familiar with SEPP 72T plans. If so, then you can set up an IRA, and tell them that it will be a SEPP 72T plan. Since you already have an IRA, if that company handles SEPP 72T plans, then you can rollover your 401-K into the IRABEFORE you arrange for it to become a SEPP 72T plan. Then the combined IRA plan becomes the basis for your SEPP 72T. I would not change it to a SEPP 72T first, and then roll over the 401–K into it. I think that would “bust” your SEPP 72T plan even before you started.2008-08-12 08:42, By: dlzallestaxes, IP: [22.214.171.124]
L2: IRA RolloverLu. Your first sentence bothers me and I need you to clarify. You stated the following:
“I lost my job to foreign trade and will be receiving my 401k next month.”
When you state that you “… will be receiving my 401k next month,” do you mean that you have already processed the distribution and you arewaiting for the check that will bePAYABLE TO YOU? If so then you have bigger problems than worrying about starting a SEPP Distribution Plan. Hopefully the money is still in your 401(k) and you have not already initiated distribution actions.
Jim2008-08-12 08:57, By: Jim, IP: [126.96.36.199]
L2: IRA RolloverThe check has not come to me. I will be rolling my money into an IRA and “requesting” to sign up for the 72t plan after I place my funds into an IRA. When I place my 401k money into an IRA, can I move my smaller IRA intothe larger IRA?2008-08-12 09:04, By: lu, IP: [188.8.131.52]
L2: IRA RolloverOK. We”re getting there but I”m still not clear on the status of what”s going on.
Open a “dry”IRA account with the custodian, whether it”s a brokerage or mutual fund doesn”t matter.Most companies require either their paperwork or for you to call the K-plan custodian with the transfer information to initiate a “trustee-to-trustee transfer,” which is the method you want to use.
If you have the K-plan custodian send a distribution check to you and the check is PAYABLE TO YOU, they are required to withhold 20% for Federal Taxes. You can complete the rollover into the new IRA within 60-days of your receipt of their check, but you have to make up the 20% withheld by using other funds. Otherwise the 20% is treated as an “early distribution with no know exception” and you pay taxes and penalty on this amount. By using the “trustee-to-trustee” method, 100% of your k-plan is transferred to the new IRA without any withholding, without penalty and without taxes.You can either use a new IRA account for the K-plan transfer or, assuming the smaller IRA is a Traditional IRA and you are happy with it, you can transfer the K-plan into the existing IRA. In any case, complete all of the transfers using the “trustee-to-trustee” method before you establish your SEPP Distribution Plan.You may have all of this clear in your mind but I wasn”t sure so I figured it would be best to review these points.Jim2008-08-12 09:32, By: Jim, IP: [184.108.40.206]
L2: IRA RolloverJim makes a good point. Your 401k should be moved by “direct rollover” to avoid 20% withholding and the problems that will create for you. If you have submitted distribution papers that do not specify this, call them right away to see if you caught this in time to re do the papers requesting a direct rollover to the IRA.
Now, a new point. If the IRA is small as you indicated, you might consider keeping it separate from the 72t plan so that you can use it for emergency needs. Having an account for extra needs can save you from busting your 72t plan with years of retroactive penalties and interest, and you would pay the penalty only on the distribution from the small separate IRA.
Of course, not including the IRA will make your 72t distribution somewhat smaller, but having the emergency account provides you with valuable “insurance”. 8 years is a long time to expect your 72t distribution to be “about right” for your needs, and over that time period there some unexpected spending need is bound to occur. This is particularly the case if you don”t feel you will be able to land a new position anytime soon.
One last point. There has been some talk about tax or other relief for people who have lost jobs due to globalization. Stay tuned to what Congress comes up with in this arena as it may prove to bevery valuableto you.2008-08-12 14:41, By: Alan S., IP: [220.127.116.11]