How do you roll over your 401K when you leave the company? What other things did you wish you new right before leaving?
15 replies (most recent on top)
used to work at Fidelity ... you are all speaking on and ni different realms of the rollover process..... some of you are converting to Roth... yes taxable...some of you are talking about stock units funded by treasury stock... some of you are talking about de minimis rollovers... small balance... some of you are talking about inherited 401ks or pensions.... IRA BDA's ... there are tax consequences ... either based on you age age ... your deceased spouses age or MRD's ..minimum required distribution.... any rollover from a non taxable account to a Roth... is taxable...
If you will be 55 in the year that you leave a company there are special rules (often called the Rule of 55) that allows you access to the fund in that one company's 401k as if you are 59-1/2. If you are of this age then this is a good reason to keep your funds in the 401k instead of rolling it over into an IRA, since the Honeywell 401k does not s—. This does not apply to IRAs. This is also a reason to roll a former employer's 401k into the current employer's 401k as the rule only applies to the 401k with the current employer.
Nothing requires you to rollover your 401K.
I left HON about 5 years ago. Kept my 401K as it was when I left.
It has done as well as my rollover IRA from another previous job.
I would do the same thing again if I had it to do over.
Don't roll over your 401k. Leave it with fidelity. You're getting a benefit (reduced fees) by being part of a large group. No financial advisor necessary either. According to Warren Buffett you only need to invest in the s&p index fund. Also don't cash out your pension, it's a lifetime annuity and good thing to have when the stock market tanks.
@1cuv - you are correct that it is a fund, but ill informed about the tax options. The Fidelity advisors at Honeywell advised me that there is a potential HUGE difference in how they can be taxed. After my advisor investigated, it completely changed our plans for rolling it over.
What is net unrealized appreciation? Net unrealized appreciation (NUA) is the difference between the original cost basis and current market value of shares of employer stock. The IRS offers a provision that allows for a more favorable capital gains tax rate on the NUA of employer stock upon distribution, after certain qualifying events. For me, the Honeywell Stock Fund of my 401K was funded through by Honeywell through their 401K match.
Many people just keep their funds at Fidelity, however I'd advise you to find a good financial advisor who will actually ensure your money grows and pays attention to your account. Roll it over to an IRA. If you chose the lump sum pension option, roll that over as well. Honeywell will send you a check so they can keep the cash in their own accounts longer. Pay the $20 to have it sent FedEx for your peace of mind.
@1ecq No one has actual Honeywell stock in their Honeywell 401k.
You could have shares of a fund that follows the value of HON stock.
From a tax standpoint, there is no difference between this fund and any other fund in the 401k options.
If you have Honeywell stock in your Honeywell 401K, then you should learn about "Net Unrealized Appreciation" on those funds. I cannot adequately explain it, but the basics are that they can be taxed at a capital gains rate rather than at your more expensive normal tax rate. There are rules on how you treat these funds (i.e. you lose this capability if you move them from Honeywell stock into your other funds). Something your financial planner should be aware of as it might give you significant tax savings.
https://nb.fidelity.com/public/nb/honeywell/home
As @1ixx stated I also left my 401K where it was with Fidelity. I left three years ago as a retiree and I'm comfortable managing it on my own, I find the management fees Fidelity charges that are baked in to each fund are very reasonable.
See the above link for access to your account if you no longer work at Honeywell. You have to register as a new user.
My 401k is with fidelity (Everybodys too?) You can leave it there when you retire. Still have access, can link it to a bank account for withdraws, and continue to manage it yourself. They also have other investment options that are self managed. Call them, I've had good dealings with them.
My husband took the lump sum for his pension. HW calculates the final amount and sends a check. We had it made out to Fidelity and for the benefit of my husband's name. Wasn't a taxable transaction. Then you can decide where to invest from there. Simple and easy.
Just find an IRA custodian that you like. They will do it all. It's simple.
If you like Fidelity call them it's even easier since they are already the 401K custodian.
Keep in mind that none of the investments will transfer "in kind" but they can choose similar funds and keep your proportions the same. Except for the HON common stock fund. That will have to be allocated to a mutual fund of some kind.
Lots of info on line, but it starts with finding an IRA custodian whose offerings include the investment choices that you want. If you have a separate IRA now, you can role the 401k into it. For the pension, you need to take the lump sum option with instructions to send it to the IRA. Lots of details, but key point is to do it right so yo don't have an unwanted, unexpected tax hit. I did both, but way too much detail to go into here.
Winning lottery numbers.
Also how to roll over pension?