Know The 60 Day Rule For 401k Rollovers

Posted by Hank Brock

February 8, 2010

by Roger Harrison

It is often difficult what option you should use to get your funds out of your existing 401k account. One of the major stresses of this process is the uncertainty of what exactly you should be doing. Add this stress to already existing stress of managing your retirement account and the whole process can be rather overwhelming.

Because of the importance of this decision, it is critical that you take the necessary time to research and explore the different options you have to make this 401k transfer. Consulting your financial consultant or tax advisor is always a good idea.

A good financial advisor can direct you towards the type of retirement vehicle that will be best for your account. You can transfer your account to another 401k, a Roth IRA, a traditional IRA, or other retirement vehicle. Your advisor will also know the latest tax laws you should be aware of.

The IRS has ensured that 401k rollovers are difficult for the investor, creating rules and regulations that are seemingly designed to trap the taxpayer. One of these types of rules is the 401k’s 60 day rule.

The 60 day rule simply refers to the amount of time that you are allotted to reallocate your funds from your retirement account. Once you make the decision to move your funds, the IRS doesn’t want you to dawdle. They intend for you to be decisive in your decision and not drag out your choice.

Regardless of how trivial this rule is, the IRS is rather stringent on the execution of it. Most good financial planners will instruct their clients to prepare for the transfer by making their decisions beforehand. This allows you sufficient time to make all of the fund movements, and ensures that you don’t miss the deadline.

You shouldn’t make the assumption that the Internal Revenue Service will be forgiving with this rule. In fact, quite the opposite is true. Even cases involving only one or two days has incurred the penalty and been rejected appeals.

There are only a couple of different situations in which the IRS may be somewhat lenient of this 60 day rule. Most of which are rather extreme and not likely to apply to you. In cases such as incarceration, hospitalization, disability, or death, the Revenue Service may consider your appeal. This compassion ruling does come with some stipulations also. There is often a fee associated with the IRS waiving this penalty due to hardship.

About the Author:

Roger Harrison is an experienced financial planning enthusiast that has extensively studied how to do a 401k rollover to ira and the best ways to transfer your money. Visit him online at the The 401k Rollover Guru for more information on these and other related topics.

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