IRA Rollover

Archive for June, 2011

Question: What to do with my 401k?

I changed job and my current employer doesn’t allow 401k contributions until after 90 days of employment. My 401k from my previous job is valued at $18,000 with an outstanding loan balance of $8000. I receive a letter saying that my loan is due upon termination of employment. The letter also states that if I don’t complete the form enclosed, they will roll over my balance to an IRA (Gartmore Funds). Do I just find a way to pay off the loan and let them roll over my balance to the IRA? I’m not able to rollover my balance to my new job yet. What’s the best solution? Thanks.

Answer: It’s always best to roll over a 401K into a individual IRA. This will allow you more flexibility in terms of how you want to handle the money, as well as allow you a wider variety of funds.

When you took out the loan, the paperwork said that upon separation for any reason (termination, layoff, voluntary quit) that you would have 60 days to pay back the loan. If you don’t pay the loan back in this time frame you will be assessed a withdrawl. This includes a penalty of 10% plus standard income tax.
- this is federal law.

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