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Today’s tip will cover “Can you roll a 401k into an IRA without penalty?

The short answer is Yes. If you recently changed jobs or are no longer working with your previous employer due a career change or retirement and if you have reviewed all your options for your 401k and decided to move money into your IRA, then you have to take several steps to make sure your 401(k) rollover is coded correctly.

Moving money from an old retirement plan such as a 401K to an IRA can be easy.  Here are a few steps tips to consider.

  1. If you received funds from your old 401k plan, you have the option of doing a 401k to IRA rollover. If you contribute an amount equal to your 401(k) distribution into an IRA within 60 days of the original distribution, you won’t have to pay income taxes or a tax penalty on the distribution.
  2. If you don’t already have an IRA account, then you will need to set one up with a financial institution. Then, you can request what is called a trustee to trustee transfer to your IRA. This method avoids you taking possession of your retirement funds and won’t incur a tax penalty.

For your specific tax related questions consult with your tax advisor.

If you are wondering what to do with your old 401(k) then watch our video called “Should I Rollover My 401(k) or Leave It?”

For more information regarding 401(k) rollovers, check out our 401(k) FAQ’s video playlist.

If you’re struggling with not knowing what to do or where to start when it comes to managing your finances and investing.  I have a great video that will help you accomplish more with your money, without giving up latte’s or any of that nonsense. You can get the video at savvyupnow.com/money101.

Catherine Magaña is a CFP® or CERTIFIED FINANCIAL PLANNER™ and Managing Partner at Savvy Women Wealth Management in Carlsbad California.

P: 760-692-5700