Don't Rush to Roll Over a 401(k)

If you're 55 when you leave a job, it might not be a good idea to transfer your retirement account funds to an IRA.

I will be 58 in a few weeks, and I am thinking of retiring. My broker wants me to do a rollover IRA, but then I won't be able to withdraw any amount until I am 59½. What are my options? Thanks for your help.

This is one situation where it could be a bad idea to roll over the 401(k) into an IRA. If you are at least 55 in the year you leave your job, you may be able to withdraw money from your 401(k) at any time without penalty. But if you roll the money over into an IRA, you're generally hit with a 10% early withdrawal penalty if you touch the cash before age 59½.

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Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.