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Mitchell's Money Minute: 401K Rollovers
By Philip Mitchell
Tonight's question is a two part question. What happens to your 401K if you decide to leave a job and what is the best way to avoid a huge tax bill during the transition?
"You have a few options if you ever were too separate from your employer. If you wanted too, you could rollover. That's the term, rollover your 401K if you got to work at another job, you could rollover your old 401K into your new 401K at your new employer. That is a tax free event," said Logan Stanley, Financial Advisor Edward Jones.
"The other option is your could rollover your old 401K into a traditional IRA, Individual Retirement Account. You can do so with no taxes and no penalty, so you really have two options there."
So, the high points to keep in mind this week are, if you leave a job where you have a 401k account, it is possible to rollover the account and avoid any tax penalty. Your two rollover options are rolling it over to your new employer or rolling it over into a traditional IRA account. Both of these options are tax free events.