Roll Over Retirement Money the Right Way

By Kolonji Murray


When it comes to rolling over retirement money, there is a right and wrong way to do it. For many people the process can be confusing and frustrating. One should always consider working with a financial advisor to avoid a heap of tax headaches similar to the following situation:

Just recently, a client switched jobs and wanted to do something with the 401k retirement money they had acquired with their previous employer. This individual contacted the custodian of their 401k money and asked them to send a check for the full amount of the account. The custodian sent the check and my client proceeded to deposit the check into their regular checking account. HUGE MISTAKE!

In making that deposit, my client created what is known as a taxable event.  Every dollar that went into that account was not only taxable as if they had gone to work and earned the money, but because they took the money out of their retirement account before they were 59 and a half years old, they faced an early withdrawal penalty of 10% of that money-creating almost a $20,000 tax bill. Fortunately, we were able to get the transaction reversed and have the funds deposited into a traditional IRA account.

When possible, moving retirement money from one retirement to another retirement account is ideal. In doing so, individuals ensure that they don’t make any mistakes and create a taxable event scenario.

About the Author, Kolonji Murray

kolonji-murrayTaxAssurances, LLC is an independent financial services firm that provides expert advice and solutions in three financial disciplines: Accounting, Insurance and Investment Management. It’s Founder, Kolonji Murray, has worked as a banker, accountant and financial advisor for a number of leading firms. He holds a degree in Accounting from Hampton University and is active in a number of civic and industry organizations. Along with being an Accountant, Mr. Murray holds Series 7 and 66 licenses in the state of New York. He is also licensed to provide life, accident and health, variable life/variable annuities insurance.


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