Small 401k and quitting

#1
So I started my 401k earlier this year and now have found a new job, so I put in the 14 days. My questions is how is it handled from here. the balance is currently ~$425 (which is 5% of each check so far)

When and how will they cash that out since it is not enough to roll into a ira, and are they still going to match the 5%?

Thank you
 
#2
The $425 that is in there is 10% of each check really...your 5 plus their match. Their match is already vested so its yours to keep. There is a 401k document on the targetpayandbenefits.com site that outlines the payout info. Savings and Retirement tab -> Plan Information Available Online -> then look at the 401k's Summary Plan Description.

Looking at that document it says less than $1,000 is paid to you automatically, $1,000 to $5,000 is automatically rolled over into an IRA they have an outside bank create (not ideal) and $5,000 they continue to hold and manage as they do now. No matter how much you have you should still be able to roll it over into another plan or IRA.

Within a month or so of your termination you'll get a letter asking you to go to the benefit site and choose your payout option otherwise the above defaults will be used. You'll still want to go on there and choose the cash payout because it might take awhile for them to automatically send it if you take no action ("the last business day of the quarter following the quarter of your termination date" according to the SPD).

It was a smooth process for me, you just have to wait a bit for it to start. I filled out the IRA rollover form on their site on a Monday and had it available in my IRA the following Monday I believe.

Summary: Do nothing and they'll mail you a check next year, or fill out a form on their benefits site and you'll get a check or rollover sooner.
 
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#4
The $425 that is in there is 10% of each check really...your 5 plus their match. Their match is already vested so its yours to keep. There is a 401k document on the targetpayandbenefits.com site that outlines the payout info. Savings and Retirement tab -> Plan Information Available Online -> then look at the 401k's Summary Plan Description.

Looking at that document it says less than $1,000 is paid to you automatically, $1,000 to $5,000 is automatically rolled over into an IRA they have an outside bank create (not ideal) and $5,000 they continue to hold and manage as they do now. No matter how much you have you should still be able to roll it over into another plan or IRA.

Within a month or so of your termination you'll get a letter asking you to go to the benefit site and choose your payout option otherwise the above defaults will be used. You'll still want to go on there and choose the cash payout because it might take awhile for them to automatically send it if you take no action ("the last business day of the quarter following the quarter of your termination date" according to the SPD).

It was a smooth process for me, you just have to wait a bit for it to start. I filled out the IRA rollover form on their site on a Monday and had it available in my IRA the following Monday I believe.

Summary: Do nothing and they'll mail you a check next year, or fill out a form on their benefits site and you'll get a check or rollover sooner.
Ok my only question there is my YTD total does not include their 5% as ive checked that on a few stubs. Will they just add it or is it gonna be thrown out since I quit before a year.

EX:

Previous stub YTD - 93.22

Next check gross - 588.13
New 401k YTD - 123.84 (+30.62 or 5% of my pre-tax pay)

Thank you
 
#5
Ah, ok. If you are looking at the check that itemizes your personal deductions so the match won't (and never will) be there. Log into the targetpayandbenefits.com site and check your balance there. The match is contributed every time you get paid and is immediately 100% vested (yours to keep).

Ok my only question there is my YTD total does not include their 5% as ive checked that on a few stubs. Will they just add it or is it gonna be thrown out since I quit before a year.

EX:

Previous stub YTD - 93.22

Next check gross - 588.13
New 401k YTD - 123.84 (+30.62 or 5% of my pre-tax pay)

Thank you
 
#6
Ok thank you. Last question are they firm on these numbers? I think with my last check it will put me near $1010 with their 5%. Wondering if I could avoid making a small Ira, and cash out anyways at that amount.

Thanks again.
 

buliSBI

Former Team Member
#8
Anytime you cash out a retirement fund before you are 65, you will be taxed (10% or $200???). You will need to roll it over into another qualified retirement account within 90 days of your leaving the company. After that, it will automatically be rolled over into an outside-Target retirement account (ex. KeyBank). If your new company, doesn't have a 401k, just go to your local credit union or bank, and open an IRA.
 
#9
Ok thank you. Last question are they firm on these numbers? I think with my last check it will put me near $1010 with their 5%. Wondering if I could avoid making a small Ira, and cash out anyways at that amount.

Thanks again.
If you do not roll over the $1010 you'll take a good 25% hit on it. The money in your 401k was not taxed when it was deposited in the account, if you withdraw it you'll pay income tax on it (say 15%ish) AND you'll pay a 10% penalty for early withdrawal. A 401k account is meant to be a tax sheltered way to save for retirement, they don't make it fun to withdraw early I'm afraid. I would recommend checking out vanguard.com and getting an IRA through them, they have very low fees.
 
#10
You are assuming the money was put in pre-tax, and you are probably right - but maybe not. You can choose to put the money in post-tax so it is NOT taxed when you start to withdraw it. Yes, there are many people who do that. Not me, but many.
 
#11
You are assuming the money was put in pre-tax, and you are probably right - but maybe not. You can choose to put the money in post-tax so it is NOT taxed when you start to withdraw it. Yes, there are many people who do that. Not me, but many.
True, I do roth for my IRA which is popular. The match will always be considered pre-tax though so I'm at least half right :)
 

redeye58

Hasta Ba Rista, Baby!
#12
I put mines in post-tax. You can actually do up to 5% pre-tax AND 5% post-tax but spot will only match one.
Plus, if you make what I do, you wouldn't have much paycheck left afterwards :(
 
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