Fidelity 401K question... huh?

[NowImDownInIt]

So when I logged on to Fidelity NetBenefits to see how much my balance has dropped this week, I noticed something new...

A little orange and gray box that contained the following message:

"Please Note:
In accordance with the provisions of your retirement savings plan, you are scheduled to either receive a cash distribution or have your entire vested account balance rolled over to an Individual Retirement Account on 11/21/2008.

Rolling your account into an IRA is designed to continue the tax-deferred status of your retirement savings and avoid taxable distributions of these balances."

What does this mean?? I don't have an IRA...

[AngelinaCatHub]

NEVER take possession of a check out of your retirement. It has to be from institution to institution. If you even hold that check, you are subject to income tax and early withdrawal penalties. BE CAREFUL. 'Hub

[NowImDownInIt]

I don't want it!! I just don't know what I should do.. That message just showed up and it is still on there... Should I open an IRA and roll it over?

[arkienurse]

I don't want it!! I just don't know what I should do.. That message just showed up and it is still on there... Should I open an IRA and roll it over?

Are you still with the job this 401k is through? I would call Human Resources and ask them what is up with the notice. Then go from what they tell you. If you have left the job, I would check into opening an IRA so you have a place for them to send the check. I agree with Hub, do not just let them send you a check. My understanding is if it ever hits your hands, even if you do not cash it, but just endorse it over to the other acct, you will take a tax hit, even if you didn't actually have any of the money at any time.

[NowImDownInIt]

Okay, I left the job a while ago, so that makes sense then. I think I will just roll it over into a IRA through Fidelity. I don't want that check... No matter how tempting, lol.

[chloe0724]

Most 401k's only allow you to remain in the plan after you have left if you keep a certian amount there. You may be under their minimum. It should be easy to roll it over.

[fltoo]

The rollover does not have to be institution to institution, but taking the check and reinvesting it becomes a nuisance.

If you take the check minus the mandatory withholding, you need to re deposit the the entire amount. So, you have to come up with the difference.

Some institutions don't take out the withholding, so you will not have this problem.

[TEW]

I think you have 90 days to make the deposit CHECK THAT.
I would not touch anything right now that’s connected to the stock market. My IRA took a 20K nose dive yesterday. DW said stop looking at that or your have chest pains.

[lillaimof2kids]

That right - I'm trying to darndest to not look at my IRA! I know it's dropping, but I keep trying to remind myself I'm in it for the long run! It's hard to tell what will happen in 10 years!

[Flamingo]

That right - I'm trying to darndest to not look at my IRA! I know it's dropping, but I keep trying to remind myself I'm in it for the long run! It's hard to tell what will happen in 10 years!

My boss (I work for a lawyer who has broker calls daily) told me not to look at my 401(k) statements for a few quarters at least, don't touch anything or sell, sit tight, because it's all long term. If you plan to retire in less than 10 to 15 years, you have to really look at diversifying your 401(k) money and future contributions so talk with a plan rep at the place that holds your 401(k) if you don't know what to do. Most plans already offer diversified "funds" based on a date you plan to retire, i.e. 2020, 2030, 2040, etc....and are already broken down for you as to investing.

[Yankeegirl]

Ok, here's the low down (I used to work in the tax dept of a VERY large Financial Svcs company - specifically with 401(k)s and IRAs)

1. If your balance is not high enough (usually $5,000) then Fidelity can force a liquidation of the account
2. Your best bet is to do a Direct Rollover to an IRA at Fidelity or another company (I personally prefer Vanguard).
3. Contact the company where you want the IRA, tell them you have a 401(k) that you need to move into an IRA. They will send you paperwork to complete. They will then send the paperwork to Fidelity and Fidelity will cut a check to the IRA.
4. You WILL get a 1099-R next year. However, as long as the check is made payable to the new institution, you will not owe any taxes. (there will be a special code on the Form that shows it was a rollover - I think it's a code G in box 7)
5. As long as the check is NOT made payable to you, you won't owe taxes regardless if you get it or the other company gets it (some companies send you the check made payable to the other company, that's OK)
6. You only have to worry if you receive the check in YOUR name. In that case, you have 60 days from receipt of the check to roll it into an IRA. The sending company would have withheld 20% for taxes (it's mandatory). You would then have to deposit the check PLUS the 20% withheld in order to avoid taxes next year.

Good luck!