Avoid Adverse Taxes by Rolling Over Your 401K Into an IRA

Rolling your 401K into an IRA is one of the smartest things you can do with a retirement plan. The cleverest thing, of course, is being astute enough to sign up for your company's 401K plan. You were smart, and signed up for your company's 401K, however, you are now leaving the company, and therefore, your job. To avoid paying the taxes you would incur by cashing out your 401K money, you want to rollover your 401K into an IRA by following these steps below:

  1. Choose a bank, brokerage firm or mutual fund company to rollover your 401K into. The financial institution you choose will give you a form that authorizes a direct rollover once you open the account. Do not forget to fill out the form authorizing your rollover. When you open an account, be aware that all financial institutions (banks, brokerages and mutual funds) must comply with the U.S. Patriot Act. This means you will be asked for your name, address, date of birth and other information to verify who you are.
  2. Read your 401K plan literature to determine if your 401K charges a fee for either selling funds in your account or for an outgoing account transfer. If your 401K charges a fee for an outgoing account transfer, ask your new IRA custodian if they will pay that fee for you.
  3. You may be able to transfer existing mutual funds in your 401K to an IRA at a brokerage firm. But in order for this to occur, both the brokerage and 401K must allow it. Be aware that a lot of brokerage funds only accept cash. Call your old 401K plan as well as your new IRA custodian to inquire if this is permissible. If it is not allowed, your mutual funds must be liquidated.
  4. Make sure the check from your 401K is deposited in your chosen bank, brokerage or mutual fund IRA within 60 days of the date it is sent out. Call your IRA custodian to make sure your funds have arrived. Although it is rare, 401K funds can sometimes be sent to the wrong account or wrong location.

Once your 401K has been rolled over into an IRA, you can breathe a sigh of relief. You have made a great decision to transfer your 401K into your IRA fund. The money in your IRA will grow tax free until your retirement, and hopefully provide you the funds to have a prosperous retirement.



How To Buy a Series EE Savings Bond

If you need a safe place to hold the savings you have accumulated, or if you are looking for the perfect financial gift for a loved one, U.S. Savings Bonds may be the answer for you. There are two types of Savings Bonds. Series I Savings Bonds earn a variable rate of interest that is meant to protect against rising inflation. Series EE Savings Bonds purchased after April 2005 earn a fixed rate of interest for up to thirty years.

Where to Buy. You may buy Series EE Savings Bonds at most financial institutions, including your bank or brokerage firm. Some employers also offer payroll deduction purchase plans. You may also buy savings bonds online through the TreasuryDirect. If you buy a savings bond online through TreasuryDirect, you may have the paper certificate mailed to you. You may also choose to hold the bond electronically in your TreasuryDirect account, which will allow you to easily manage and sell the savings bond at your convenience.

How Much to Buy. Paper Series EE Savings Bonds are sold in face value denominations of $50, $75, $100, $200, $500, $1,000, $5,000 or $10,000. The actual purchase price for a Series EE Bond is one-half of the face value of the bond. Therefore, a Series EE Bond with a face value of fifty dollars will actually cost you twenty-five dollars. Electronic Series EE Bonds purchased through TreasuryDirect are sold in any amount, to the penny, of twenty-five dollars or more. Electronic Series EE Bonds are purchased at face value, which means that a twenty-five dollar bond will cost you twenty-five dollars.
Purchase Limits. There are limits to the amount of Series EE Savings Bonds that you may buy in any one calendar year. You may buy up to $30,000 of electronic Series EE Bonds in any one calendar year. You may also buy up to $30,000 ($60,000 face value) of paper Series EE Bonds in the same calendar year. Savings bonds purchased as gifts do not count toward the annual purchase limit.

Gifts. To purchase a Series EE Savings Bond as a gift, you will need the full name and Social Security number of the recipient. If you intend to buy a paper Series EE Savings Bond, you should be aware that it will take approximately three weeks for the bond to be mailed to you or to the recipient. Your financial institution may provide you with a gift certificate so that you can let the recipient know that the paper bond has been purchased. You may also have a savings bond gift delivered electronically through TreasuryDirect.