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Chapter 19. Roll, Roll, Roll It Over > When You Can and Can't Do a Rollover - Pg. 188

Roll, Roll, Roll It Over 188 If you're lucky, you just happen to have $2,000 lying around that you can add to the $8,000 that you got from the trustee. Then you can write a check for the full $10,000. However, you'll have to wait until you file your income taxes to get a refund for the $2,000 that was withheld. In other words, you just loaned Uncle Sam $2,000 interest-free for several months. How nice of you! Now suppose that you're not so lucky, and you don't have $2,000 lying around. You'll just have to be content rolling over the $8,000. Here's where Uncle Sam gets mean. The $8,000 escapes income taxes because you rolled it over within 60 days, but the $2,000 is treated as a taxable distribution. So, you'll have to pay income taxes on the $2,000. And if you're under age 55, you also get hit with the 10 percent early payment penalty--$200 (10 percent × $2,000 = $200), in this case. At the end of the year, you'll still get the $2,000 refund, but it will be reduced by the taxes that you pay on it and the early payment penalty, if applicable. When You Can and Can't Do a Rollover So, now that you know how to do a rollover, you should know when that trick works and when it doesn't. You are generally eligible to roll over 401(k) money in these cases: · If your employment ends or you become disabled, or when you retire. · If you are the surviving spouse of someone who had a 401(k), you can also request a rollover --but only into an IRA, not a 401(k). What Can and Can't Be Rolled When your dollars are in a 401(k) plan, they all work together, in total equality. But those dollars are