Consolidating 401 k accounts
Under this method of transfer, you actually take possession of the funds from your previous plan — that is, the distribution of the plan funds are sent directly to you.
Once that happens, you’ll have 60 days to complete the rollover to another IRA, or the proceeds will become taxable and, if you are under age 59 ½, you’ll also be subject to the 10% early withdrawal penalty.
In many cases, the trustee of the old account will withhold 20% of the distribution from the plan to cover income taxes.
While this could be an excellent cover in the event that you don’t complete the rollover within the required 60 days, it comes with a set of complications all its own.
As long as you handle the transfer of your accounts correctly, the transition should be seamless, and both tax & penalty-free.
Please keep in mind that rolling over assets to an IRA is just one of multiple options for your retirement plan.
Then you take another job with a 401(k), and maybe while you’re there you set up another IRA account, just because you can.Now that it’s so common for people to have several — often many — jobs over the course of a lifetime, having a “collection” of retirement plans is pretty much the norm.Sometimes that’s an advantage, you may have different retirement plans set up in various accounts with different trustees in a way that just works for you.Let’s say you have ,000 sitting in an IRA account, and the trustee issues a check for the proceeds directly to you.If they withhold 20%, your check will be for just ,000.