Fete Lifestyle Magazine November 2021 - Food Issue | Page 26

because the IRS doesn’t view the transfer as a withdrawal of your tax-deferred savings.

B. Cash out

Alternatively, you can cash out your old account and deposit it into your new one. As long as you make this deposit within 60 days, you won't owe income tax or any penalties on the money you cash out. However, making that deposit is your responsibility. If you don’t make it in a timely manner—and according to the IRS’ rules—it may be treated as a withdrawal, taxed as regular income, and potentially subjected to a 10% early withdrawal penalty.

3)Roll over your old 401k into an IRA

If you're not moving on to a new job right away, or if your new employer doesn't offer a 401(k), you might consider rolling over your old 401(k) into an IRA. Rollover IRAs allow your money to continue growing tax-deferred, and they give you a wide array of investment options, including stocks, bonds, mutual funds, index funds, and exchange-traded funds. Plus, if you're below age 59½, you're eligible to withdraw money from your IRA without a penalty for a first-time home purchase or higher education expenses.