Avoiding Penalties with a 401(k) Rollover

At various times through your professional career, it may become necessary to move your retirement account. Although this can be a complicated process, you'll want to do everything in your power to avoid monetary penalties with your 401(k) rollover. The Internal Revenue Service (IRS) requires that you fill out certain paperwork and move money in a timely fashion in order to avoid taxes or penalties.

Avoiding Penalties with a 401(k) Rollover: Plan Ahead

First of all, regardless of the new method with which you secure you retirement plan, you must have deposited your 401(k) money into a new, tax-qualified account within sixty days of the withdrawal. So before you initiate the change, you should perform the necessary research. Talk with your tax attorney or CPA and discuss the best ways to invest your retirement money. You might discover that a 401(k) rollover isn't your best bet, which is something that you should know in advance.

Avoiding Penalties with a 401(k) Rollover: Know Your Limits

Most people have a low threshold for risk tolerance when it comes to 401(k) retirement plans. You don't want to invest in something that has a high risk of going down the tubes because to do so is the equivalent of gambling with your future. To avoid potential mistakes, set your limits well in advance and explore options that fall within your risk threshold.

Avoiding Penalties with a 401(k) Rollover: Take Care of the Paperwork

As soon as possible after you have initiated the change, request the necessary IRS paperwork from your new asset manager. Filling out these forms in a timely fashion will save you from tax penalties, and you'll have peace of mind once it's all taken care of. The IRS currently attaches a 10$ penalty to any money that hasn't bee re-deposited into an account within sixty days.

Avoiding Penalties with a 401(k) Rollover: Hire a Professional

If you are at all confused about anything regarding your rollover or transfer, it is always best to solicit the help of a professional. Investment experts will have the resources necessary to properly advise you as you conduct your 401(k) rollover and will be sure to help you to avoid any taxes or penalties.

Avoiding Penalties with a 401(k) Rollover: Keep Track of Your Investments

Once the rollover is completed, make sure to keep abreast of any changes. Check all investments in your account on a monthly or quarterly basis to be sure that you have made the proper decision. If anything seems amiss, or if you have any questions, be sure to talk with an investment professionals to clear up all potential problems.