Here’s a look at the 5 biggest 401k rollover mistakes. Some of them are very common and can be costly, either in terms of losing your account’s tax sheltered status or in losing out on profits.
Remember, these things have happened to other people.
So, they could happen to you.
#1. You fail to redeposit the funds within 60 days.
The check could get lost in the mail. You could have some kind of family emergency. You might be in the process of moving and somehow lose the check. All of those things have happened to account holders at one time or another. Something interferes with them finding a new account provider and the next thing they know, they are in trouble with the IRS.
Failing to open a new account and redeposit the funds within 60 days is one of the 5 biggest 401k rollover mistakes, because, when if it happens, the entire value of the account will be taxed as regular income for that year.
The IRS will make exceptions, in some cases. For instance, victims of hurricane Katrina were given a full year to redeposit the funds. But, unless there is a blanket exemption like that one, the process is long and drawn out. The best thing to do is to pick a new account holder, before you initiate a roll-over and take precautions to insure that the check is deposited within the 60 day period. Continue reading ‘5 Biggest 401k Rollover Mistakes – Are You at Risk?’ »