The 401(k) Rollover Mistake That Can Trigger Taxes and Penalties!

If you’re leaving a job soon and you have a 401(k), you may want to roll it over into an IRA. However, beware of a potentially costly tax trap before you act. To keep your savings growing tax-deferred, the safest move is to arrange a direct trustee-to-trustee transfer from the 401(k) to your IRA. If the funds are sent to you by check or electronic deposit, your employer must withhold 20% for federal taxes. You then have just 60 days to replace that 20% and deposit the full amount into your IRA. Otherwise, the withheld portion becomes taxable. If you’re under 59½, you could also face a 10% early withdrawal penalty. Contact us with your questions.