Need more detail about previous 401k question?

Question

My husband has got a new job, his current employer sent home this massive packet, which is like latin to my husband and I. We are unsure if his new job accepts rollovers, we have left a message with their CFO. It isnt that much money. Can someone explain the penalty for lump sum distribution vs. rollover? My husband does know that his new company does not start 401k til after the 90days probationary period? In the paperwork it mentions rollovers have to be distrubted during a 60day period or penalties will incur. I have looked into IRA's and they all require way more money than what he has in his 401k.
thanks all I am at my wits end.

Answer 1

Well you can do the rollover without the new company setting it up for you. Any of the brokerage firms can set up the account or you can do it via all the online firms. Even though the new company doesn't start his IRA until after the probationary period that probably means that they don't allow the matching portion to start until then. They might allow you to rollover into his plan there. Lump sum distributions incur a penalty of 10% and taxes on the entire amount.

Answer 2

You don't need to rollover the old company 401K to the new company's 401K. Contact the company handling the old 401K and ask them to set up a rollover IRA.

When the 401K at the new company kicks in, you'll just have retirement funds in two places.

You definitely do not want to withdraw those funds. You'll have a 10% penalty and the whole lump sum will be subject to income tax.

Answer 3

Personally, I would roll it over in to an IRA. Check with your bank or other financial institution that you do business with.

Here are some ideas:
Vanguard
Fidelity
H&R Block Financial Advisors
Ameriprise Financial

Cashing it out is generally a bad idea. You may lose up to 40% of it to penalties and interest.