I recently changed jobs, I want to move the 401k money into a different IRA. Am I subject to penalty if I distribute the money to myself then roll it into an IRA of my choosing? What are the tax rules for such a distribution? Thanks for any answers in advance…
Not an accountant but Wells Fargo been very very good to my former 401k.
Not an accountant, but me thinks that if it is not rolled directly into another “retirement account” it is subject to penalty and tax. That is if you are not of retirement age. If you are not a financial wizard, it is best to leave it up to the pros, kinda like if you want to catch big flatheads, you call BK.
I think you have a certain amount of time to roll it into a qualified IRA but I would check with your tax person or investment person to make sure. It was quite a few years ago that I did that and my memory’s not as good as it once was. 
not an accountant either, but last year i retired early and rolled my 401k into an IRA with no fees or taxes
however, if you take any of that money for personal use before age 59.5 you are subject to a 20% penalty and 10% tax for uncle sam
once you are past 59.5, you can withdraw from an IRA with no penalty but you still have to pay the tax at withdrawal or at tax time
60 day rollover rule, 401k IRS RULE. CHECK http://www.irs.gov
Complicated transaction, your former employer could be forced to withhold 20% if you don’t designate where the money is going, BEWARE..
You want the check to be written directly to the new carrier. You do not want a check written to you..
FDR
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if you take any of that money for personal use before age 59.5 you are subject to a 20% penalty and 10% tax for uncle sam
once you are past 59.5, you can withdraw from an IRA with no penalty but you still have to pay the tax at withdrawal or at tax time
I sure hope you get a jar of vaseline with that 
That sounds like it hurts 
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I recently changed jobs, I want to move the 401k money into a different IRA. Am I subject to penalty if I distribute the money to myself then roll it into an IRA of my choosing? What are the tax rules for such a distribution? Thanks for any answers in advance…
WAY easier to have the account transfered directly from your former employer to the mutual fund, bank, etc. of your choosing. Go to the NEW financial institution and request/download the Rollover IRA transfer forms. Complete the forms and the NEW inst. will take care of the transfer.
And yes, I am an accountant…
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I recently changed jobs, I want to move the 401k money into a different IRA. Am I subject to penalty if I distribute the money to myself then roll it into an IRA of my choosing? What are the tax rules for such a distribution? Thanks for any answers in advance…
WAY easier to have the account transfered directly from your former employer to the mutual fund, bank, etc. of your choosing. Go to the NEW financial institution and request/download the Rollover IRA transfer forms. Complete the forms and the NEW inst. will take care of the transfer.
And yes, I am an accountant…
Any suggestions on were to put it? Its 15 years of savings and pretty sizeable. My main retirement account 
A Roth IRA may not be a bad option. Or find some stock options that will give you a good ROI
If it is sizable, you might want to keep the funds in a separate IRA. If you new employer’s plans has rules against loans or what assets you can hold, it might be nice to have it in a plan with more flexibility.
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I recently changed jobs, I want to move the 401k money into a different IRA. Am I subject to penalty if I distribute the money to myself then roll it into an IRA of my choosing? What are the tax rules for such a distribution? Thanks for any answers in advance…
WAY easier to have the account transfered directly from your former employer to the mutual fund, bank, etc. of your choosing. Go to the NEW financial institution and request/download the Rollover IRA transfer forms. Complete the forms and the NEW inst. will take care of the transfer.
And yes, I am an accountant…
Any suggestions on were to put it? Its 15 years of savings and pretty sizeable. My main retirement account
If you’re asking “where to put it?” as in what institution, a major mutual fund company like Fidelity or Vanguard, etc. are good low cost choices and they both offer a wide array of investment options.
If you are asking for specific advice for what to invest in, I suggest that you should subscribe to Money Magazine and Consumer Reports to learn more about retirement planning and investing so that YOU can make the choices that are best for you. Until then, stick with something simple like an S&P 500 index fund, and AVOID bond funds at this point in the interest rate cycle (and any blended funds that contains bonds.)
Good luck.
Dan
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I recently changed jobs, I want to move the 401k money into a different IRA. Am I subject to penalty if I distribute the money to myself then roll it into an IRA of my choosing? What are the tax rules for such a distribution? Thanks for any answers in advance…
Do NOT distribute the money to yourself! You will be hit for taxes and penalties AND you will cause yourself huge paperwork headaches to get the money re-invested.
First, you can leave your money in your current 401k plan. You do not HAVE to move it just because you have changed employers, and you certainly don’t need to hurry.
You are using several terms here that make ask do you really know what you want? A 401k is different from an IRA. You can have a 401k on your own, you do NOT need to be employed or to use an employer’s plan.
Whatever you decided to do, you want a “direct rollover” so that you don’t get hit for taxes or penalties. It’s also the simplest as far as low paperwork.
If this is your primary retirement nest egg, I would say slow down and get good advice. A fee-only financial planner is the gold standard for unbiased advice, but “investment advisors” that are tied to specific companies can also be very helpful. Just know that these advisers are paid to sell their companies products, so you must be the judge of weather or not these are the best choice for you.
Understand that the best option may be to roll over your 401k into a combination of plans, for example put part in a 401k, part in a Roth IRA, and part in a Traditional IRA. These are all versions of tax deferred or tax sheltered plans, but they work differently and have different advantages.
My wife and I use a fee-only planner that I can recommend. We also have separate accounts with Ameriprise and New England Life, and I would recommend both of our advisors with these companies as well, but again they are not independent. PM for details.
Grouse
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not an accountant either, but last year i retired early and rolled my 401k into an IRA with no fees or taxes
however, if you take any of that money for personal use before age 59.5 you are subject to a 20% penalty and 10% tax for uncle sam
once you are past 59.5, you can withdraw from an IRA with no penalty but you still have to pay the tax at withdrawal or at tax time
In most cases it’s the opposite; the withholding tax is 20% and the pre-59.5 penalty is the 10% amount.
As far as the original question, it’s a heck of a lot easier to do a direct rollover. Taking direction possession is asking for a headache.
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not an accountant either, but last year i retired early and rolled my 401k into an IRA with no fees or taxes
however, if you take any of that money for personal use before age 59.5 you are subject to a 20% penalty and 10% tax for uncle sam
once you are past 59.5, you can withdraw from an IRA with no penalty but you still have to pay the tax at withdrawal or at tax time
In most cases it’s the opposite; the withholding tax is 20% and the pre-59.5 penalty is the 10% amount.
As far as the original question, it’s a heck of a lot easier to do a direct rollover. Taking direction possession is asking for a headache.
difference in state regs? 
anyway, i withdrew a modest amount after i had passed 59.5 and the tax was 10%, plus you have to count it as income
and no way was i foolish enough to withdraw funds early and get hit with the 30% 
although i know some who have 
thanks Average Joe!!! went 2.56 lbs, 15″.
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not an accountant either, but last year i retired early and rolled my 401k into an IRA with no fees or taxes
however, if you take any of that money for personal use before age 59.5 you are subject to a 20% penalty and 10% tax for uncle sam
once you are past 59.5, you can withdraw from an IRA with no penalty but you still have to pay the tax at withdrawal or at tax time
In most cases it’s the opposite; the withholding tax is 20% and the pre-59.5 penalty is the 10% amount.
As far as the original question, it’s a heck of a lot easier to do a direct rollover. Taking direction possession is asking for a headache.
difference in state regs?
anyway, i withdrew a modest amount after i had passed 59.5 and the tax was 10%, plus you have to count it as income
and no way was i foolish enough to withdraw funds early and get hit with the 30%
Yes, post 59 1/2 the penalty aspect should fall by the wayside and the taxes then become a function of received income.
If the funds are put back into a Qualified Retirement Plan (Traditional IRA) as either a Direct Transfer or Qualified Rollover, you will not incur tax nor penalty.
A Direct Transfer (Trustee to Trustee) is where the funds from the 401k are transferred directly to the IRA. You don’t receive a check. This method can be desirable as you shouldn’t have to worry about documenting that the funds were placed back into a Qualified Retirement Plan. The 1099-R you receive (if any) would indicate the transaction is not taxable/subject to penalty. Less scrutiny by IRS.
A Qualified Rollover has time constraints as far as redepositing the funds into a Qualified Retirement Plan. Two items to take into consideration with this method, make sure you have documentation that the Rollover was completed within the 60 days (60 days is 60 days, not 61) and understand that you may only do 1 Qualified Rollover in a 12 month period. I’ve had many clients over the years not understand that provision and get hit with tax/penalty. Under this scenario, you will receive a 1099-R and have to show the transaction was not taxable/subject to penalty.
If the funds are placed into a Roth IRA rather than a Traditional IRA, as someone previously mentioned, you will have a taxable event. It wouldn’t be subject to penalty, but could certainly generate a substantial tax liability. I normally don’t recommend a Roth Conversion unless there is a good reason for it. I would need more information regarding your situation to make any sort of recommendation.
JD
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If the funds are put back into a Qualified Retirement Plan (Traditional IRA) as either a Direct Transfer or Qualified Rollover, you will not incur tax nor penalty.
A Direct Transfer (Trustee to Trustee) is where the funds from the 401k are transferred directly to the IRA. You don’t receive a check. This method can be desirable as you shouldn’t have to worry about documenting that the funds were placed back into a Qualified Retirement Plan. The 1099-R you receive (if any) would indicate the transaction is not taxable/subject to penalty. Less scrutiny by IRS.
A Qualified Rollover has time constraints as far as redepositing the funds into a Qualified Retirement Plan. Two items to take into consideration with this method, make sure you have documentation that the Rollover was completed within the 60 days (60 days is 60 days, not 61) and understand that you may only do 1 Qualified Rollover in a 12 month period. I’ve had many clients over the years not understand that provision and get hit with tax/penalty. Under this scenario, you will receive a 1099-R and have to show the transaction was not taxable/subject to penalty.
If the funds are placed into a Roth IRA rather than a Traditional IRA, as someone previously mentioned, you will have a taxable event. It wouldn’t be subject to penalty, but could certainly generate a substantial tax liability. I normally don’t recommend a Roth Conversion unless there is a good reason for it. I would need more information regarding your situation to make any sort of recommendation.
JD
WOW
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WOW
I stayed at a Holiday Inn last night. 
That and almost 20 years experience in accounting.
But probably more so it’s the Holiday Inn.
DT
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