Liquidating rollover 401 k
Taking an early withdrawal from a retirement account — or taking cash out of the plan before you reach age 59½ — can trigger income taxes on the amount, along with a penalty.
At the end of the year, the plan administrator issues a Form 1099-R reporting the distribution, sending a copy to you.
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Consider the following options: If the plan allows, you can leave the assets in your former employer’s 401(k) plan, where they can continue to benefit from any tax-advantaged growth.
Find out if you must maintain a minimum balance and understand the plan's fees, investment options, and other provisions.
Maybe they face a financial crisis — like a big, unexpected tax bill — and a 401(k) loan seems like an easy way to get some low-interest money.
Or they leave a job and figure it’s easier to just cash out their old 401(k) than go through the process of moving it.