Q: What are my choices for 401k plan rollovers?

A: If you change jobs, there are three things you can do with your 401k retirement plan:

Option 1: You can leave your 401k money there. If you have over $5000 in the plan your former employer has to let you do this.

Option 2: Take the money out. This is a dumb move! You are depleting your retirement savings. And if you are less than 59 1/2 years old, you will also have to pay taxes on the money and pay a 10% penalty!

Option 3: Roll your money over to your new 401k plan or into an IRA.

If you have chosen option 3, the rollover, then you want make sure you NEVER touch the money! You need to do a trustee-to-trustee transfer. You would need to contact the company that runs your new 401k plan to initiate this. That is the safest easiest way.

Another ugly option would be to have the your previous company write you a check. But they will withhold 20% for income taxes. You will get the 20% back when you file your income taxes. But the problem is that in the meantime, you are required to deposit 100% of the balance from your previous employers 401k plan into the new account within 60 days. But since the IRS is holding 20%, you only have 80% of the balance. You would have to come up with the remain 20% to deposit into the new account, or pay taxes and penalties on the missing 20%.

401k plan rollovers can be tricky! Be careful. Talk to the plan admistrators, and make sure you understand your choices!