Pitfall 4: Rolling Assets Over Too Soon

From AIG Funds

You may want to wait if you are in an employer-sponsored plan and need income flexibility!


Rollover mistakes- taking with before age 59 1/2

If you are age 55 or older (but younger than 59½) and just left your employer, you may want to delay rolling your assets into an IRA, especially if you have immediate income needs. Current tax laws generally won’t allow investors to take money from an IRA prior to age 59½ without paying a 10% federal tax penalty for early withdrawals. On the other hand, you can withdraw money from an employer-sponsored plan without paying the 10% penalty, as long as the separation occurs during or after the calendar year in which you reached age 55!