I just got laid off

[atomic-fly]

I have a 401k that I need to roll over into another plan or
take the pay off.

They say I will pay the fed 20% with cash out, do I get taxed on top of that?

It also said I can't roll onto a private account only another work account.
Well since I don't have a job, that won't work.

Anything else I can do with it?

Thanks.

[amdezurik]

1. well according to Dana Perino...

no sorry, i don't want to be all snarky when you have just had that happen to you. Personally I don't know of any alternative beyond the ones you have detailed already. We were sold 401k's as the be all and end all for retirment and this is the result...

[notadmblnd]

2. No, you will not be taxed again after the 20%

if you roll it over into something else, then they will not tax it at all. Do not put it into another work (your now former employer) account. I was told by my attorney when I lost my job that they do not have to ever pay you another dime of interest. I would also think that it is illegal for them to tell you you cant roll it over into an annuity or CD's.

[grannie4peace]

3. i think so- but am not sure--- i'm so sorry for you

:hug:

[Lithos]

4. You need to talk to a financial person

There used to be a mechanism where you paid it and provided you got it back into an approved plan within a specific time frame, that it came out in a wash. Ie, you paid it, but it comes back to you.

Again, talk to a planner.

L0

[mdmc]

5. contact your 401k folks

see if you can set up a 401k to transfer it into.

Keep that chin up. Joesph Campbell claimed that his unemployed days were his best...

peace and low stress bro

[Crabby Appleton]

6. The 20% is just what they withold, not the actual tax,

if you're under 59 1/2 you will have to pay a 10% early distribution penalty plus your year-end tax rate.

[GoesTo11]

12. That could be a good deal

If you will have no taxable income this year, you could withdraw some of the money (just enough to get you to offset all your deductions and exemptions) and pay 10% tax on it now and no other tax. When you retire, even though it will grow if the market goes up, it's likely to be taxed at a rate higher than 10%. If you're already in the 15% tax bracket, then your effective rate on withdrawals would be 25% and it's not worth it.

[madaboutharry]

7. I am sorry about your job.

Do speak with an accountant or someone at your bank. Usually at a bank there is a finacial planner who will speak with you free of charge.

[Common Sense Party]

8. The 20% is the mandatory federal withholding tax, if you cash out.

Then, come next April, if you are in a higher tax bracket, you'll have to make up the difference and pay up to your tax rate on the distribution.

You will also, in April, have to pay a 10% penalty on the whole distribution (not what's left over after paying income taxes) if you are younger than 59 1/2.

And if you have state income taxes, you'll pay those as well.

So you'll probably lose 30% - 40% of your vested account balance.

Much better to roll it over to an IRA. That's BS that you can't roll to an IRA. Of course you can. Open up an IRA with Vanguard or ScottTrade or something and have the money transfer directly to the IRA. DON'T have them send a check to you, or they will withhold the 20%.

If you have more than $5000 in the 401 you can leave it where it is. They can't force you to roll it or move it if you have more than $5000.

[A HERETIC I AM]

22. Excellent points. The OP Should make sure that any check is written "FBO"

or "For the Benefit Of".

(I know you know this, CSP, so this is for the OP, should he read it)

As CSP states, first open the account at a brokerage or Mutual Fund company. It seems to me, correct me if I'm wrong here CSP, that some 401(K) plan providers will send you a check directly but either way, the check should be made out as follows;

Pay to the order of ABC Brokerage FBO John Doe IRA (they may also include the IRA account # if you give it to them)

CSP used the term "Constructive Receipt" in his other post. THIS IS VERY IMPORTANT.

The IRS considers that you have taken constructive receipt of the funds after 60 days. Do NOT place the check into your checking or savings account. Take it or send it to the brokerage where you just opened your new IRA immediately.

[dave29]

9. you will get taxed on top of that

for the income, I believe. I've had to do this -- and I remember the bite being more than I expected. DO not do it unless you absolutely have to. Last resort is to cash out the 401k.

Very sorry to hear about the layoff. I have been employed now for 7 months after getting my job outsourced by a job I held for 9 years. I was unemployed for 6 months.

-Dave

[sinkingfeeling]

10. Sorry, you were laid off. What possiblity of regaining the job after the economy rebounds a little?

[zazen]

11. well, if you're married, you can get a divorce & your spouse can get it thru QDRO, which isn't taxed

Very sorry to hear of your circumstances.

I'm being only slightly ironic. I had a QDRO after my divorced and dipped into it. That's what it's for. It seems to me there were other qualified withdrawals besides rollovers.

Can you roll it into a self-employed account (forget what they're called--I'm self-employed but never used one), or is that what you meant by "private"?

Best of luck to you!

[RainDog]

14. quadro is taxed. you just don't have to pay the penalty for early withdrawal n/t

[zazen]

17. my bad, but you're not taxed a fixed 20% plus state, are you? it's income dependent, right? n/t

[Common Sense Party]

18. QDRO is taxed at the moment you take constructive receipt of the

money, right? Many spouses choose to have their QDRO portion "rolled" into an IRA, so they can defer taxes and let that grow until retirement. They won't pay taxes until they w/d from the IRA.

[Justitia]

13. You can roll it into a CD-IRA w/no penalty.

First of all, I am very sorry this has happened to you. My husband has been laid off in the past and it is always a scary event, no matter your particular financial situation.

On the 401-K issue....

You can roll it into another employer plan like they told you, which is what usually happens when you are leaving by choice to immediately take on another job.

You can roll it to a financial institution (i.e., a bank), opening up a CD-IRA at no penalty to you (make sure it is a direct transfer to the bank, not you), and you can just park it there and let it accrue interest (no tax event).

You can cash it out, but you will pay both a 10% early withdrawal penalty AND income tax on the withdrawal. Your employer will most likely offer to hold back the penalty and tax amount for you or you can assume responsibility for that when you file your taxes next year. This last option takes a huge chunk of the value of your 401-K and I don't recommend taking such a big hit unless you are absolutely desperate for the cash.

They should have explained these options to you a little better, you've got enough on your mind right now.

File for unemployment insurance NOW. In lots of states you can do it online.

Good luck and take care during this difficult time.

[RainDog]

15. my condolences for your job loss

you should consult a professional about your options, wouldn't it seem? I moved things out of the stock market a few weeks ago - I had procrastinated for a while and I was lucky that I got out before this mess. I think safety is a good investment strategy now unless you're a day trader and all that. I'm not.

[Donnachaidh]

16. check to see what your state laws are

Same happened to us, and they took 10% for Feds, and told us we would be taxed by the State for the amount we pulled to pay expenses.

It's a really BAD time to be laid off. Good luck.

[MarianJack]

19. Please accept my sympathy.

I've been unemployed for over 6 months, so I don't count anymore.

Beat wishes for your job hunt. I hope you find something very soon.

PEACE!

[dixiegrrrrl]

20. I was in same situation....

When you leave a job, you can move your 401-k anyplace you want to.

The job usually has the forms for you to sign releasing the account to a rollover.


Here is how it worked for me:

I moved mine into Vanguard Money Market account ( I super trust Vanguard, have used them since 1993.)
My old job lied to me about not being able to release it. but I knew better.
I can Google, you see.

You contact the place you want to move the account to,let's use the name VG.
Ask them for IRA roll over forms.
They send them to you.
You fill them out.
There is a place on the forms for your former /job 401-k account info.
Send the filled out forms to your new account....
VG notifies your job to release the account directly to VG.
It took about 10 days for me, back in 1999.
You never touch it, no tax.

You did not say how old you were.
You can take some money from your 401-k if you have had the account for 5years and you are over 59 .5 years old.
Otherwise there is usually a tax, but there are also exceptions to the tax.

I recommend Suzy Orman book ...she really is quite good.
Also a google will pop up the exceptions to penalties for early 401-k withdrawal.
I know medical is one.
School another, unless they have changed law.

Always take your retirement account out of your ex-job.
And if it is in an annuity or anything like that, later you can move it into a cd or whatever you want, again with no penalty. I have done that to some retirement funds.

Best of luck....

[atomic-fly]

21. Wow! Thanks for all the help and sympathy!

I am 46 by the way, so I still have time for the investments to rebound.
Even though it was handled super shitty and it came out of the blue, I'm glad to
be moving on.

I will move it to a new account, thanks for all your help!