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Answer:
Dear
BuyandHolder,
You
have a couple of options. But before you make a final
decision, I urge you to discuss the matter with your
accountant. Here's what you need to know for that
discussion.
Option
Number One
Most
company 401(k) plans allow participants to leave the
money where it is, even if they voluntarily leave
the firm or are fired. If you like the investment
choices the plan offers and if your account has done
well, this can make very good sense.
However,
if you go this route, you must make sure to keep track
of your old company. You will want to know if it moves
to a different location, closes its doors, declares
bankruptcy, changes 401(k) investment choices, uses
a new plan administrator or alters any of the rules
governing the plan.
Once
you are no longer working for a company, it's easy
to neglect tracking these extremely important factors.
So,
if you're the type who doesn't look back once you've
closed the door behind you, think twice about this
option.
Option
Number Two
You
can roll over your 401(k) into an Individual Retirement
Account (IRA).
The
key advantage to this option is that with an IRA you
are able to invest in stocks, bonds, Treasuries, CDs
and mutual funds of your own choosing. In other words,
you are not limited to the company's own stock and
the limited menu of funds the 401(k) plan administrator
offers the employees.
You
can also buy and sell as often as you like. Some 401(k)
plans -- and perhaps yours -- limit the number of
times during a 12-month period that you can make changes
to your account. This makes it difficult, if not impossible,
to take advantage of changes in interest rates, fluctuations
in the stock market and promising new issues.
Tax
Implications
If
you decide on Option Two, you absolutely must ask
your 401(k) plan administrator to transfer your money
directly to the designated IRA.
Do
not, under any circumstances, accept a check.
If you do, the IRS requires your employer -- that
is your old employer with whom you had the 401(k)
-- to withhold 20% of your assets for tax purposes.
If
you select a rollover, you can open an IRA for that
purpose here at BUYandHOLD. Simply click
here for all the details.
BUYandHOLD's
administrative fee is very low, only $25 a year. However,
if you set up a monthly E-ZVestsm
within 30 days of opening your account, and keep it
active until the anniversary of your account opening,
your fee will be waived. And if you pay that fee with
a separate check, rather than having it deducted from
your account, it qualifies as a tax deduction provided
you itemize on your federal tax return.
After
you set up the account, it costs $2.99 per buy or
sell trade. And, you will receive a monthly statement
via e-mail.
Good
luck!
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