28 March 2005
Without scrambling the nest egg
New rules for 401(k) accounts kick in today. Under the previous terms, if you left a job and had less than $5,000 in your 401(k), the employer would cut you a check for the proceeds, less 20 percent for taxes, unless you opened an IRA and rolled the 401(k) balance into it. (And, of course, if you kept the money, you'd have to report it as ordinary income and pay income tax on it.)
Today, if you have at least $1,000, the employer must set up an IRA on your behalf, and you have the option of leaving balances over $5,000 in the original 401(k) even though you don't work there anymore.
The idea, of course, is to keep you saving toward retirement: about 70 percent of employees changing jobs take the cash and run, and nearly half of all 401(k) accounts contain $10,000 or less.
TrackBack: 10:46 AM, 29 March 2005
» Not worry free, but getting there from Rocket Jones
Over at Dustbury I saw an interesting snippet about changes in the 401(k) rules. Glancing over them quickly, I can see where they'll benefit a lot of people, if they're smart enough to take advantage. The company I work for......[read more]