Hey, you just made my strategy public.

 

No difference in this case. A rollover is a rollover. The only way to get hurt tax-wise on this transaction is to cash out on the 401k, which would trigger income taxes and penalties for early withdrawal.

It doesn't matter what the contribution limits are, if you have $500,000 in your 401k to roll over, you can roll it over without worries. But going forward, if you intend to contribute more, then the limits can come into play. One advantage of 401k over IRAs in that regard ((aside from the higher yearly limits) is they are withheld on each paycheck, just like taxes, which makes contributing a bit less painful. Another is that many companies match as someone else noted, making you free money. It's always a good idea to take free money.

 

Ok.........free money IS a good thing.....

 

Just to clarify, I will definitely be participating in the new company's 401k program. As y'all have said, free money is a good thing. What I'm uncertain of at this point is what to do with my existing 401k money....roll it into an IRA or roll it into the new 401k account.

 

Right - by posting contribution limits, I did not mean to imply that such limits apply to a rollover. I interpreted the question as relating to the ongoing benefits of an IRA versus a 401(k) - if my interpretation was wrong, I offer my sincere apologies.

Rusty

 

I recently changed companies and rolled the money into a Traditional IRA with a mix of mutual funds. Biggest advantage is that if you die with money in the 401k your benificiary can be forced to withdraw the full amount and pay a higher tax rate on it. Not so with the IRA, it can be left in a retirement plan. As far as the Roth, they are a great plan but my theory is to delay the tax as long as possible.