My mom has a 401k at her current employer and is no longer contributing. She wants to rollover to an IRA.?

Question

-She will be 65 in February.
-She is no longer contributing to the plan.
-There is NO company matching.
- The plan is held with Schwab but administered by a third party who set up the accounts and such. This "advisor" charges ridiculous fees even though the guy does nothing with her account (no advice, no fund movements etc.).

- I understand that some plans may not permit rollovers, especially of pretax assets in the account, but what if she's over 59 1/2 or what about once she reaches 65?

Answer 1

Some plans allow inservice distributions of all amounts once participants reach age 59 1/2. Typically it's plans where the owner is a little older and thinks THEY might need access to their plan's money. Have your mom check her Summary Plan Description to see what it says about withdrawals.

Answer 2

If she's still employed there, she can't do a rollover and probably can't take a distribution either.

If she wasn't still employed there, shouldn't be a problem - she should be able to fill out paperwork to roll it over - if she knows where she wants to put the rollover IRA, that company would most likely handle most of the paperwork for her.

Being 59-1/2 just means that she can withdraw from her 401K without a 10% penalty, but she'd still have to pay the income tax on whatever she took out and didn't roll over. Being 65 won't change that. And if she's still employed there, no matter what her age, she probably doesn't have the option to take a withdrawal.

Answer 3

That's a big question. Is she still working there? If she is, she has to leave the money there unless the company allows her to take "in-service distributions," ie. has a rule that lets her take money out before she stops working there. Many plans have this, but she has to check with the plan advisor/provider.

In general, if you're interested in how she can get money out of there so she can use it or at least not pay the ridiculous fees to this advisor, I'd check out http://www.plannerconnect.com/retirement-planning-401k-401k-rollover.html.

Answer 4

Many banks/financial institutions accept IRA rollovers. However since your mom will begin taking distributions relatively soon, I don't see the need to roll the money over (it still grows at Schwab). But the fee situation can definitely cut into your returns. Nonetheless, check out Vanguard or Scottrade.com.. both have inexpensive/free IRA accounts to which she can roll the money over.

Answer 5

She need to read to plan document or talk to the administrator.

In some 401-K, you can only roll over if you are no longer an active employee. (retire or termination).

She need to know this particular plan's design.

Answer 6

Contact the bank where the IRA is held.