401(k) rollovers


Q: Would I be able to use the funds from my qualified 401(k) that I plan to roll over to make this payment into the Federal Employees Retirement System retirement without IRS penalty, losing 10 percent? For example, if the funds from the previous corporation’s 401(k) was $5,000 and the catch up I needed to make to FERS retirement was $5,500, could I pay that amount with the 401(k) funds and not get a penalty or pay early distribution fees?

A: Unfortunately, you can’t roll your 401(k) or IRA funds into your FERS annuity account. If you separated from your last employer during or after the year in which you reached age 55, you can tap your 401(k) without penalty, although you’d have to pay any tax due. Rolling over the balance to an IRA kills the penalty free access until you reach age 59½, unless you can meet one of the exception listed in IRS Publication 590. I recommend that you consider transferring any 401(k)/IRA balances that don’t contain after-tax money into your new TSP account. You won’t find a better retirement investment environment, anywhere.

— Mike Miles


About Author

Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to fedexperts@federaltimes.com and view his blog at money.federaltimes.com.

Leave A Reply