Originally created 03/31/02

Rules vary for moving 401(k)

Q: The only money I have in company stock in my 401(k) plan is what my employer has matched. Is there any point at which I can move any of this matched money to another investment option in the 401(k)? I have both before-tax and after-tax money in my 401(k). My understanding is that if I roll over my 401(k) to an IRA, the after-tax money cannot be rolled over. If this is true, are the after-tax dollars that I would receive from my account before age 59 1/2 due to a rollover subject to the 10 percent early withdrawal penalty? - J.C.

A: Whether or not a participant can or cannot sell company stock is specific to your company and plan, said Lynn Allen, vice president and retirement adviser with The Scarborough Group, a consulting firm in Annapolis, Md.

To find out if you can move these matching funds into other options, look at the summary plan description you should have received from your human resources department, Ms. Allen said. If you do not have one, ask for one. The summary should list any restrictions and holding periods for the company stock your employer used to match your contribution, she said.

As of Jan. 1, 2002, you have the option of rolling after-tax dollars that you may have in a 401(k) plan over to a self-directed IRA, Ms. Allen said. If a rollover of a 401(k) plan is started before you turn 59 1/2 and the after-tax dollars are not sent to the self-directed IRA, the after-tax dollars are received free of the 10 percent penalty, she said.


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