It's not too late to avoid income taxes
Did your employer automatically send you a check and close out your account? If yes, you certainly noticed that income tax (about 20 percent) was withheld-and you may have been hit with an early withdrawal penalty if you aren't at least 59 ½. Here's how to get that 20 percent back and keep saving for retirement.
- You have 60 days from the date of your check to deposit your money in your new employer's plan, or in an IRA or annuity you set up. Click here for more on your rollover options.
- When you make the deposit, you will need to make up for the 20 percent that was withheld out of your pocket. (The total amount you deposit in the new plan must equal the total amount in your former plan.)
- At income tax time, you can receive a credit for the 20 percent your former employer withheld.
- Want help with this transaction? Contact a financial professional.
If you don't make arrangements to roll over your money, you lose the 20 percent. Plus, the government will penalize you an additional 10 percent for taking an early distribution if you're younger than age 59 ½.
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