Granger, IN asked in Tax Law and Public Benefits for Indiana

Q: Need help figuring out 401k distribution options ( separated from work age 55)?

Whether cash out, convert to IRA, Roth IRA or C-company?

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1 Lawyer Answer
Eric Steven Day
Eric Steven Day
Answered
  • Tax Law Lawyer
  • Henderson, NV

A: It just depends on what type of work you are doing now. For instance, if you are working for another company, you might roll it into their 401k plan. If you are in retirement, the IRA might be a good option because you are just waiting on distributions. If you are running your own business, you may consider starting a management company in the form of a C Corporation and sponsoring a solo 401k with that Corporation. This will allow you to contribute much more money and use the capital in the 401k for your investment needs. You can loan yourself up to half the vested balance or $50k whichever is less and not have to pay it back within the 60 day period like an IRA. You could pay it back over a 5 year period this way. However, you are limited to the lent amount where if you could put all the money back within 60days you could potentially lend the entire balance from an IRA. This is why it just depends on your goals going forward.

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