Transferring a 401K to a IRA?

Question

Adding to a previous question. I lost my job and need to cash out my 401K (We have no money in the bank) but since I dont work there I cant just withdraw what I need , I have to witdraw the whole amount and that will cost me half my money. I have $68K and I will lose $30K to taxes .
This is my question , can i then do this then , Transfer the 401K to a Traditional IRA then withdraw just what I need maybe $15 to 20K paying about half to taxes leaving $48K in my IRA. Will I lose anything when I transfer from 401 K to IRA and then Can I imediatly withdraw the money i need say 20K from the IRA i just set up.

Answer 1

Yes is the simple answer.
But if I can provide a step by step approach, that may help.
1. Roll your money out of your 401k into an IRA should take 7-10days at the most FIRST.
2. If you are over 35 look at a rule 72 which is a way to withdraw from your IRA without penalty. (Keep in mind if you need a large amout at first this will not work)
3. If the rule of 72 amount per year is not enough figure out what your monthly amount is you need ask for just that amaount systematically deposited into your checking account
4. You want to minimize the amount you pay yourself purely because of the 10% penalty remeber had you taken this money in your pay check you would have paid tax. (You should not go from 68k to 30k that math is not right!)

But remeber roll first into a personal IRA when you dip into your 401k you are playing by your company's guidelines when you dip into your IRA your playing by your rules.

Answer 2

Yes. You can rollover the money into the IRA and then take only what you need. The money you pull out will be considered income in the year you pull it out, and you will be tagged with the 10% penalty on whatever you take out. Try to not touch it if possible. If you use it to pay for education, you will not have to pay the 10% penalty. There may be a lag between the time you set up the transfer and when you can actually get at the money. It depends on who you set up the IRA with. You may also have to pay a fee if you pull out your entire IRA (closing fee), but if you intend on not taking out everything, you are better off with this scenario. Even if you take everything out, if you can delay taking out some of it until 2007, you will save on taxes. Please try not taking much out because this is your hard-earned retirement money.

Answer 3

If the company sends the check to you rather than to wherever you're establishing your IRA, you could just keep part of the money (whatever you need) and pay the penalty and taxes on that, and put the rest into your IRA. If you're going to move it all then immediately withdraw some, check with the place you're putting your IRA to be sure there's no waiting period.

Good luck.

Answer 4

if you roll the whole amount there will be no tax penalty. to do what you want to do you need to cash out and put the remaining amount in an IRA and you will get taxed about 30%. or more.