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What can I do with my 401k if I am no longer working and if I am not planning on going back to work?

Im 34 years old. Im not planning on going back to work. I have a 401k thats getting charged fees. I really want to withdraw it, but what would I be able to do with the funds where I wont be taxed or penalized?

May 27, 2016 by Adda in  |  Flag
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Adda,

You can roll your 401(k) into a Traditional IRA in your case. By doing so you will avoid paying the 10% penalty for early withdrawal due to your age and avoid taxation on the amount distributed. Doing a direct roll over is the best way to accomplish this so that you can easily prove to the IRS that the funds where distributed out of the 401k plan and sent directly into an IRA and not have it counted as income in the year this is done. Check with the 401(k) plan administrator to find out if they charge a fee to process the rollover. Most do not.

Please keep in mind if you elect to withdraw the value of the account and not do a direct rollover you have 60 days to deposit the proceeds into an IRA or another retirement plan to avoid taxation and penalties.

There are many options in the market place available to you for management of an IRA and there are typically fee's associated with them. Before you roll over the account to a Traditional IRA you will want to do some homework on custodial fee's, investment management fee's and fee's associated with any of the funds you may choose to invest in.

You may consider also working with an advisor. Yes, you will pay that advisor a fee to manage your account but the advice on asset allocation, financial planning and help with investment selection that come along with working with an advisor should provide you plenty of value for the fee's you are paying.

I suggest working with an independent, fee only advisor. These are advisors who do not receive commissions or any type of compensation based on the products they use to manage your investments.

Good Luck!

Comment   |  Flag   |  May 27, 2016

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Adda,

I suggest you roll into a Traditional IRA. It is a very easy process that can be done all electronically. You are young, so be sure to continue to contribute to your new IRA (should you choose that route).

Best of luck to ya! Dustin Tibbitts JazzWealth.com

Comment   |  Flag   |  Jun 19, 2016

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Adda,

Just so you know depending on the amount that you have in your former 401(K), you may have the chance to just leave it where it is. And when you start with your new employer you may have the ability to roll it over into your new employer plan. This option is good if you are not certain that you fully understand how the market works and if you can't find an advisor that you feel comfortable working with. feel free to shop for an advisor but understand that you have options. And understanding how those options can benefit you or hurt you is what you may need help with. Your first step should be to check the plan rules and find out what options you have. Once you have found that out then you can get help and advice based on your situation. Good luck!

if you have any other questions feel free to reach out!

Comment   |  Flag   |  Jun 20, 2016

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