Imaginary Engineer - Yale SOM '08

Industrial Engineer dreaming of an MBA

Thursday, May 11, 2006

Rollover

Apparently there is a way to rollover my company's 401(k) to a Fidelity Rollover IRA with no tax consequences. I'm just starting to do the research, but this sounds like a good plan because I really need to diversify my retirement plan (big portion is in my company's stock) and my current 401(k) has limited options. As I was looking around Fidelity's website, I found that college tuition is considered a "withdrawal hardship." This means that MBA students like us can withdraw money from our 401(k) and not pay the huge penalties (just regular income tax). I think this is amazing because I just found a new $$ source to help pay the bills over the next two years!

PS - I'm not a finance/accounting guy, so if anyone has any good suggestions on the best way to do this (minimal fees), please post a comment.

posted by brownoski @ 9:35 PM  

7 Comments:

  • At 10:39 PM, Anonymous Anonymous said…

    Dude,
    Post more info if you find it,'cause a lot of us are in the same situation.

    Do you think, it will be better to roll over the 401k this year, but take the money out next year (lower income bracket because of no income)?

     

  • At 11:29 PM, Blogger Marina said…

    As far as I know the only difference between a 401k and an IRA is that if you get sued the 401K money cannot be touched by anyone, whereas the IRA cash is fair game. My company plan isn't too bad so I am just leaving the money there for two years.

     

  • At 6:12 AM, Blogger laserlikefocus said…

    The timing is very important when you are executing a rollover. If you don't get it right you will end up paying the withdrawal penalty. So work with the Fidelity people on this. Btw you could also check out Vanguard or T. Rowe Price. Different firms have different fee structures for IRAs.

    Assuming that you will qualify for FAFSA loan, you would most probably be better off not withdrawing money from your 401K/IRA

     

  • At 7:12 AM, Blogger AynRand2008 said…

    If you roll your 401(K) into a traditional IRA, you do not have to pay penalties. Your traditional IRA can contain Fedelity funds or other funds that the brokerage of your choosing offers.

    Early distribution tax may not apply to you if you use the funds for qualified pos-secondary school education expenses.

    So essentially, you are right. The important things is that you have to roll it into a traditional IRA first, then you withdraw. The rollover can take up to a month or two depending on your company. So pls. consult a tax advisor and act accordingly asap.. :-)

     

  • At 1:47 PM, Anonymous Anonymous said…

    If you don't plan to use the money from your 401K, then shouldn't you roll it over to a traditional IRA and then when you start your job after school, roll it back in your new 401K.

    Rolling it to Roth is a good idea, but if you plan to take money out of your 401K only after retirement, aren't you in a low tax bracket then also....Retired!!!?

    I guess, rolling to Roth will be good because, most probably after school you will not be eligible anymore to contribute to Roth, because of high salary

    All this stuff is a little confusing :)

     

  • At 2:37 PM, Anonymous Anonymous said…

    Hey Brownowski,

    Its 'wildcat' from MBABuzz, I work for a mutual fund company so I have a lot of experience with IRA's, Roth's, taxes, etc. I'm going to roll my 401k to an IRA and then probably next year convert to a Roth (I'll be at a lower tax bracket then). Not sure which company I'll go with, definitely not staying with my own. Let me know if you have any questions. Just PM me on MBABuzz. Good Luck!

     

  • At 1:33 PM, Blogger i_will_make_it said…

    I'm thinking of rolling over to a IRA as well. So much to think about and plan, huh? Can't believe all my $$ will be gone in two years...

     

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