401(k) rollovers – make sure you know all the rules before you start

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Here’s why:

A 56 year old attorney left his job.  Soon thereafter, he did a 401(k) rollover into a SEP IRA.  The next year (age 57), he took $240,000 out of the SEP IRA account.  Because he took the money out of a SEP IRA before age 59 ½, he had to pay the 10% early withdrawal penalty, or $24,000 in taxes.  The fact that the money started in a 401(k) account, is irrelevant (Kim, 7th Cir).

Unknown to the attorney (and ...

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