What do I do with my 401K money?

Question

I am planning on leaving my job and taking a break from work for about a year to take care of my grandmother. I have been putting 8% of my income in a 401K. When I leave my job, what should I do about my 401K money? Leave it? Take it out? Or something else?

Answer 1

I would go with the ira

Answer 2

You should roll it over into a Roth IRA. You'll have to pay some taxes now on it. Normally when a person does this, he or she will be taxed on it. Since you plan on NOT working, this is not a big deal. Your tax bracket will be so low that you'll get the money back anyways as a refund. Hence the tax penalty is a non-issue. Once inside the ROTH IRA, the money will grow tax free until you retire. In a 401K, the tax is simply deferred which means you pay it later (hopefully you'll be in a lower tax bracket at the time). You can also withdraw money from the Roth IRA like a bank (only the principal amount) for emergencies. W/ a 401K, taking money out is like pulling teeth and you pay taxes on it. W/ a Roth IRA, you can withdraw money w/out being taxed or penalized (only the principal). You can setup a Roth IRA w/ a mutual fund firm like Vanguard or open an on-line broker account like Ameritrade. I would do the later. You can still buy mutual funds w/ Ameritrade. Ameritrade also gives you the option to buy stocks, bonds, and even CD's now. Ameritrade gives you more options. Hope this helps. Good luck.

Please note: You want to roll it into a ROTH IRA. Don't confuse it w/ a Traditional IRA. If you plan to quit w/in the next few months, then do the conversion this yr. If you don't plan to quit until the end of the yr, then do the conversion next yr. The point is you want your income level to go down to lower your tax bracket and nullify any tax penalties associated w/ the conversion.

Answer 3

Do you plan to return to this job/employer in the future?
Can you leave your money in your 401K?
Are you happy with the 401K? or would you rather have the money in an IRA where you have more decision making?
If you take it out you have 60 days to roll it over into another retirement type account without incurring any penalties or tax.
Or of you take it ut the money can be directly transferred into the new account you set up.

Answer 4

Whatever you do don't give uncle stealing sam any chance of snatching it. Believe me when I tell you he has his eyes on it.
how you think he plans on paying for the war. Well that's another story. Just don't withdraw it especially if you don't need urgent cash. Sam's plan 20% penalty !0% some other way. You get me. roll it into your next jobs program. For now it can sit there until you have another job and if its a lot your should have a financial advisor. My services are not for barter. Sorry about that. those guys are plentiful. Good luck and rely on some strong guys to protect your loot from crooks trying to get at it. At least a strong safe and the best one is again in another 401k. Oh another thing don't borrow from your 401k's because they will force you to pay it back with after tax dollars and do what to you, double tax ya. See where I'm coming from.

Answer 5

Great question!

There are several things to consider.

1. Are you getting at least 10% on the money you have invested now? If not, find where you can invest and make a good return with your current 401(k).

2. Are you paying outrageous fees for keeping your money with the current 401(k). If you are paying more than 0.5% in fees, try going to a self-directed IRA (it'll have to be a TRADITIONAL IRA, otherwise you'll have to pay penalties and taxes on it) by Fidelity. Then, you can decide where to invest your money instead of using the restrictions of most 401(k) plans.

3. You must monitor your 401(k) every month so you can move it if it isn't making you money, or loosing money.

Your choice. keep monitoring your money every month no matter what you decide.

Answer 6

roll it over into an IRA of your own after you find out if you are completely vested. If you are not vested, you may forfeit some of the emplyee match part of the money.You can easily set up your own IRA with Fidelity or Vanguard, two major discount brokerage houses that allow online control. Do not take the money out to spend, it will cost your dearly in penaties and taxes. You are to be admired and congratulated for the sacrifice you are making to care for family...they are the most important thing you have....tom

Answer 7

Don't take it out (unless you are 59 & 1/2 or older), the IRS will take more than half of it in penalties and taxes.

You should do a "rollover" into a self-directed IRA with a local brokerage you trust, that way you'll avoid losing anything, and it can continue to grow without penalty until you retire...