Moving Pension Funds

When individuals change jobs, they generally move their 401(k) plan to their new employer’s plan or transfer them into an IRA account. The law allows you take a distribution and then redeposit the funds into the new account or to make a trustee-to-trustee transfer from the prior account to the new one.

It is generally better, for tax reporting issues, to make a trustee-to-trustee transfer between plans rather than to take a distribution. This avoids the reporting issues on your tax returns and any possibility of the transfer ending up being taxable. If you take a distribution, keep in mind that the rollover must be completed within 60 days or it becomes taxable. If you are considering your new employer’s plan, investigate your investment options and plan fees before making the transfer.

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