Whether they are changing jobs or need extra cash, many people are pulling money out of their 401(k) retirement plans instead of rolling their savings over to an IRA. As a result, Jean says these unwise investors are losing nearly all the benefits they get for having that money in a 401(k) plan to begin with. She talks with Spencer Williams, CEO of RolloverSystems, about the importance of rolling over your retirement savings into an IRA.
Spencer says when you prematurely withdraw funds from a 401(k), you risk losing up to 40 percent in taxes and penalties. For example, if a 30-year-old who plans on retiring at age 65 cashes out a $20,000 401(k), he would only take home $12,000, thereby losing $8,000 right off the bat. If he had allowed that same money to grow, Spencer says he would have had $150,000 at retirement.
Spencer says rolling over your retirement savings money into an IRA is one of your best options, and he offers this advice for getting started:
Published on August 31, 2008