I have a 401k account with an old employer and I am in the process of moving it over to an IRA account.?

Is it true I can only transfer to a traditional IRA as oppose to a Roth IRA?
 I was told only taxed money can go into a Roth IRA.


Answer:

  1.Initiate a 401k transfer as you reach a benefit event during your professional life. The Internal Revenue Service defines a benefit event as retirement, new employment or achieving the age of 59 years and 6 months old. You must pass this threshold to consider transferring money to your IRA.

2.Fill out a 401k election form in order to move funds to your individual retirement account. This form allows you to inform your employer about the next destination and amount of money to be transferred from your 401k funds.


3.Review your IRA trustee's limitations on transfers from a 401k account. These limitations may include a ceiling for the contribution amount you can make in a year. Other accounts feature longer transfer periods to ensure that all fund movement is legitimate and completed accurately.

4.Utilize the direct transfer option to move your 401k funds to an IRA without taxes or penalties. This option allows you to move money from one trustee to another without the funds reaching your hands.

5.Move quickly to deposit 401k funds to your IRA if you received a check for the total withdrawal amount. The IRS and your old 401k manager require you to deposit withdrawn funds within 2 months to avoid taxation. Failure to deposit funds will result in a 10-percent penalty and income taxes levied against the principal.

6.Complete an application with your new IRA provider before you make any movement on your 401k account. You should make an initial deposit in your IRA to ensure the depositing system is working properly.