Company Takeover - what to do with 401k?

[yellowdoyle]

Hello all.

My employer recently was "absorbed" by another, larger company. I currently have about 5.5k in 401k money from my initial employer. I had a couple options on what to do now that a new company is taking over.

1 - Withdraw the cash and pay the tax penalty. Do you guys know how severe this is?

2 - Leave it at the old account. Apparently I made the cutoff of 5k, anything less and I would be forced to withdraw it. But does this just mean my money will be sitting there since I can no longer contribute to it via my old employer?

3 - Transfer to a new 401k with the new company. Not sure about any tax penalties with this option...

So what do you guys think the best option is? I also have an Orange ING account which I prefer to the 401k. The 401k is worth more because of employer matching funds, but I just hate the hassle and non-liquidity (word? lol) of it. So part of me wants to cash it out and just dump it all into my ING account. But if there are signficant tax costs I don't mind not doing that.

Also, kind of on topic, did anyone see this article in the LA times this morning?

401k accounts vulnerable?

[Uglyowl]

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1 - Withdraw the cash and pay the tax penalty. Do you guys know how severe this is?

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10% penalty, plus you will have to pay income tax on this

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But does this just mean my money will be sitting there since I can no longer contribute to it via my old employer?

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Should remain in the investments you had before, you may just want to verify this.

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3 - Transfer to a new 401k with the new company. Not sure about any tax penalties with this option...

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No penalty, talk with your HR department to make sure all goes well.


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Also, kind of on topic, did anyone see this article in the LA times this morning?

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Interesting read, it has never crossed my mind that this is possible.

Also learn to embrace your 401(K), one should start as early as possible and get as much free match as possible.

[Preem]

If you like your new company's 401k investment options, then I'd probably put it there. If not, then I'd probably roll it over into a self-directed IRA. That way, the assets are still sheltered, but you have complete freedom to invest as you wish.

[mo42nyy]

I dont mean to hijack but this is on topic-
If I have put in 4000 into a 401k which has gone up to 5500 in 2 yrs can I take that 5500 and put it into a different 401k without paying an early withdrawl penalty?

[Preem]

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I dont mean to hijack but this is on topic-
If I have put in 4000 into a 401k which has gone up to 5500 in 2 yrs can I take that 5500 and put it into a different 401k without paying an early withdrawl penalty?

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It depends on what you mean by "different 401k".

If you want to exchange your current investments to different ones within the same employer 401k plan, then probably "yes". You have to ask your plan administrator the details, but usually, you can switch investments once or twice a year. It varies depending on the specific plan.

If you are eligible for more than one company 401k, for example, if you and your spouse work for different companies and are both eligible for your respective 401k plans, then probably "no". You can't move your assets into your spouse's plan or vice versa.