Q: I have started a new job with a great company which offers a 401k. Unfortunately, I am not eligibile to particiapte until I am employed for 6 months. My previous employers has informed me I need to move 401k funds I have with them immediately. What can I do with it?
A: I have to commend you on starting and funding an employer 401k plan. Most employers want to remove terminated employees out of their plans as they have to pay administrative fees for these accounts. You can see how these costs can add up. So, what can you do withe these funds.
Keep it where it its: Your previous employer more than likely had a financial service company adminstrating their plan, e.g. Charles Schwab, Fidelity, Merrill Lynch. These companies would be more than happy to help rollover your account into a rollover IRA. A rollover IRA is nothing more than a regular IRA with a fancy name.
Transfer It: As in the previous, you can transfer the account to any brokerage company or bank. Just contact any one of them and they have rollover kits that will help you facilitate the transfer.
Cash out: I hesitate to list this as an option, but technically it is. You can ask the administrator to send you a check for the amount in your account. With this said, you need to keep in mind you will have to pay income tax on the amount and in most cases a 10% penalty. I do not recommend this option and should be used as a last resort.
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