401(k)退休福利计划，是美国于1981年创立一种延后课税的退休金帐户计划，美国政府将相关规定明订在国税法第401(k)条中，故简称为401(k)计划。美国的退休计划有许多类，像公务员、大学职员是根据其法例供应退休金，而401(k)只应用于私人公司的雇员。

401(k)基金规模
计划是可选性质亦是自愿性质。雇主可选择提供或者不提供这一退休计划，若选择提供该计划则须对所有雇员公平开放。雇员可自由选择参与或不参与，亦可选择非雇主提供的个人退休金计划。401(k)退休福利计划允许雇员划拨部分薪水至个人的退休账户直至离职，划拨部分多寡可自行决定。该账户内的金额在退休前提取往往会导致罚金，但在退休后提领则可享受税收优惠，雇主亦可以资金激励雇员投放。…(read more)

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401K retirement account Tips Series: How to Handle Your 401K After Leaving a Job? What Are Your Options? Pitfalls to Avoid When Rolling Over a 401K (Part 1) [Anpi Finance and Tax Q&A]

When it comes to retirement planning, 401K accounts are a popular choice for many individuals. These accounts offer tax advantages and employer contributions, making them an attractive investment vehicle for long-term financial security. However, once you leave a job, you’ll need to make some decisions regarding your 401K. In this article, we will explore the various considerations and choices you should keep in mind.

What Should You Do With Your 401K After Leaving a Job?

Once you leave your job, you typically have three options for handling your 401k account: leaving it with the old employer, rolling it over into an individual retirement account (IRA), or transferring it to your new employer’s 401K plan. Let’s take a closer look at each option:

1. Leaving Your 401K with the Previous Employer:
This option allows you to maintain your retirement savings in the familiar 401K plan. However, there may be certain disadvantages. You might face limited investment options, higher fees, and decreased accessibility to your account. Additionally, if your account balance is below a certain threshold, your employer may require you to move the funds elsewhere.

2. Rolling Over Your 401K into an IRA:
Rolling over your 401K into an IRA offers greater control over your investments. IRAs generally offer a wider range of investment options, lower fees, and the flexibility to choose your financial institution. Moreover, you can consolidate multiple retirement accounts into a single IRA, simplifying the management of your retirement savings.

3. Transferring Your 401K to a New Employer’s Plan:
If your new employer offers a 401K plan and permits rollovers from previous employer plans, you can choose to transfer your funds. This option allows you to consolidate your retirement savings into one account and potentially gain access to new investment options. However, it’s essential to review the fees, investment choices, and any restrictions imposed by the new plan.

What Tax Traps Should You Avoid When Rolling Over Your 401K?

When rolling over your 401K, there are a few tax traps you should be aware of and avoid. These include:

1. Incorrect Handling of Funds:
To ensure a tax-free rollover, it is crucial to execute a trustee-to-trustee transfer, also known as a direct rollover. If you receive the funds directly, your previous employer will withhold 20% for federal taxes. To avoid tax implications, make sure the funds are transferred directly from one account to another.

2. Timeframe Limit:
You must complete the rollover within 60 days of receiving the distribution from your 401k account; otherwise, it will be treated as a taxable distribution. Don’t forget to account for weekends and holidays within this timeframe.

3. Early Withdrawal Penalties:
If you withdraw funds from your 401K before reaching the age of 59 ½, you might be subject to early withdrawal penalties. To avoid this, explore the mentioned rollover options rather than cashing out your account.

In conclusion, understanding how to handle your 401K after leaving a job is crucial for a successful retirement plan. Consider the advantages and disadvantages of each available option: leaving it with your old employer, rolling it over into an IRA, or transferring it to your new employer’s plan. Additionally, be cautious of tax blunders when rolling over your 401K, such as incorrect handling of funds, exceeding the timeframe limit, or triggering early withdrawal penalties. By making informed decisions and avoiding common pitfalls, you’ll ensure a smooth transition for your retirement savings.