We received our full official options today:
- Roll over into company 401k
- Roll over into an IRA (traditional or Roth)
- Cashing out
My only options are really #1 or 2. I'm under 30, so #3 is useless to me at the moment. #4 requires a nearly 35% hit once taxes/penalties are figuring into the equation. Not worth it...
Thinking about an IRA so i can take the money out whenever and not be hit too hard... I was hoping to add this $$ into my rainy day savings account, but that's not going to happen.
Hmmmm. Whose annuity and what are the terms? I assume it is a fixed guaranteed annuity and not a variable? You'd have to be very careful and get some competing bids outside the plan for comparison ... you can roll a distribution to an annuity inside an IRA. Some of the new GMIB variable plans are worth a look but ONLY if you are over 45 (they will not sell one to a younger person). I have taken SOME of my retirement assets and wrapped a couple different variable annuities with a minimum guaranteed payout (floor but no ceiling) around them.
I would go for a rollover into a Self-Direct IRA .... that would give you the most flexibility. MAKE SURE you initiate the new IRA account FIRST then have the new IRA administrator go get the assets directly from your company plan. You don't want to cause anything thats looks like a withdrawal ... TRANSFER is the name of the game!
One thing ... does your 401k offer a "loan" option? The only reason I ask is that if you roll the assets into the 401k you could potentially increase your borrowing capacity in the plan. Not that I am suggesting borrowing for anything other than a disastrous emergency but it is a consideration .....
As for your rainy day savings account ... you COULD roll the money to an IRA then convert to a ROTH and pay the tax due now. The remaining amount would be the principal deposit into your new ROTH IRA and as such could be accessed anytime tax free if needed. (Rainy day savings doubling as retirement savings if it never rains) You have to do the math on the tax issue. I forget if you can still split the conversion tax over two years ... not sure.
Don't forget also .. in any IRA you may indeed take early withdrawals without penalty before age 59 1/2 IF said withdrawals are equal amounts each month/quarter/year. You will pay the income tax due but no penalty.