Convert 401k to IRA
Hi. Im 32 and quit my job of 14yrs. I have $30,000+ in my 401k there. I have so many days to convert it. What are my IRA options? Are there any IRA options that will not have penalty for cashing in IRA? What is my best options for least or no penalties? Thanks.
Permalink Submitted by mk foss on Mon, 2013-03-25 17:47
There is no penalty if you convert the 401l to a Roth IRA but the amount converted is immediately taxable and any withdrawals of the converted amount in the first 5 years will have a 10% penalty.If you roll the 401k over to an IRA, there is no tax or penalty on the rollover. Disributions from the IRA are subject to a 10% penalty unless you meet an exception such as withdrawals for higher education or a first time home purchase.
Permalink Submitted by Kimberly Bault on Tue, 2013-03-26 13:08
Ok. Mother holds the opinion that CDs are forms of IRAs. And by going that route there would be a penalty for early withdrawal of a cd that would be a portion of the interest And not a percentage of the total.Is her view on CDs correct? And, is that route advised?thanks!
Permalink Submitted by mk foss on Tue, 2013-03-26 18:53
I’m not sure I understand the question. If you cash in a CD early, there is an interest penalty that is subtracted from income. It’s not a retirement plan penalty – it’s just a reduction of interest. An IRA can be invested in CDs, but most CDs are not IRAs.