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Switching jobs and 401

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Bltdlw
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Switching jobs and 401  Reply with quote  

Hi so I've recently switched jobs and I got a letter about my 401. Ive never put anything in only what the job have me so it's only about 650 dollars but they are saying they will send me a check! Will I be charged a fee for this or are they any more options that I can do with this money? It was my first job and I so confused? Thanks
Post Fri Nov 28, 2014 8:03 pm
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oldguy
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You can either accept the $650 check - or roll it over into an IRA. If you accept the check you will have to pay the 10% penalty for taking the money before age 59 1/2 plus you will pay the normal Fed & State income taxes. Depending on your tax bracket, the cost will be in the $225 to $250 range. If you roll it into an IRA there will be no cost - call one of the major no-load fund companies such as Vanguard or Fidelity and they will open the account for you - and then tell them what to invest it in, the SP500 Index would be a good choice for a young person.
(If you have 35 yrs until retirement, that $650 will end up being about $25,000 of your retirement money, any money that you invest at a young age adds up big-time.
And it would be a good idea to sign up for the 401k at your new job, given enough time they grow into the millions by retirement (I'm retired, I was pleasantly surprised with my own 401k)
Post Fri Nov 28, 2014 10:15 pm
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Bltdlw
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Thank u I will look into the rollover. My new job calls it a 403b instead of a k but Im in my late 20s and I really want to start being better about this
Post Fri Nov 28, 2014 10:24 pm
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oldguy
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Yes the sooner the better. My 401k had about a million when I retired, a lot of that was due to starting early.
Post Sat Nov 29, 2014 1:25 am
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blixet
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Make sure you either do a direct trustee-to-trustee transfer (where you never physically receive the check) or roll the check to an IRA (if they send you the money) within 60 days. Otherwise, it is considered an early withdrawal and will be subject to the penalty and taxes. A direct transfer is usually better.

If your new job offers a 401k plan, you may have the option of rolling into the new employer's plan as well. Check with your new employer. Also it should be spelled out in the Summary Plan Document which should be available on line. It is a good idea to read the SPD to know all about how the plan works.

Information is more valuable sold than used – Fischer Black
Post Sat Nov 29, 2014 3:06 pm
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