401(k)s and IRAs: Grow your money, shrink your taxes

How to invest for retirement so that you get rich - and the IRS doesn't.

Take your 401(k) with you
Protect It
Take your 401(k) with you
If you decide to change jobs, don't cash out your 401(k). Instead roll it into an IRA or transfer it toyour new employer's plan.

You can open a rollover IRA at virtually any bank, fund company or brokerage firm. What you get in return are more investment choices and greater flexibility. IRAs also give you more leeway in naming beneficiaries and arranging withdrawals.

There are some benefits to rolling it over to your new employer's 401(k). First, you may borrow from your account, an option that is not available with an IRA. Also if you retire at age 55, you maytake money out of your 401(k) without paying a 10 percent penalty, whereas you may not empty an IRA penalty-free until you turn 59-1/2, except with rare exceptions.

One final option is if your 401(k) at your former is employer is worth more than $5,000 you may leave it to collect later.

If you do decide to rollover you retirement account, have your former boss make out a check to your IRA trustee or the administrator of your new 401(k). If the check is made out to you, 20 percent will be withheldfor taxes in addition to a 10 percent penalty. To avoid paying taxes and the penalty, you must deposit the check - plus the 20 percent that was withheld - in a new IRA in 60 days. So don't even go there.
Your 401(k) A top priority Go for an IRA MONEY's best savings strategy Take your 401(k) with you When is converting to a Roth IRA the right move? Withdraw money sparingly, if ever, and never pay a penalty First things first Tax-deferred accounts come next Ready for the Roth IRA
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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.