Teach Your Savings To Roll Over

For millions of people, voluntary savings out of each paycheck are the key to successful retirement plan.

These 401(k) accounts represent a great opportunity to build a nest egg tax free to supplement Social Security.

But watch out: You not only have to figure out how much to save and what types of investments to make, but also what to do with the money when you switch jobs.

You can roll it into another 401(k) plan at your new employer, roll it into an individual retirement account, or leave it where it is.

Each of those options, experts say, can protect your savings from taxes. Your choice depends partly on which account gives you the best investment options.

The step to avoid, because of taxes, is taking the money as a cash distribution.

Rollover rules from financial experts:

* Don't take direct possession of the account, unless you'd like to fork over 20 percent of the money to Uncle Sam and 10 percent more in penalties.

* Use a new rollover IRA account, or roll your money directly to your new employer's plan.

* You might save on taxes if you don't roll company stock into an IRA.

* Step out of the way: Let trustees for the two plans deal with the money.

* If you keep your account with your old employer, make certain there are no penalties and that the company will remain solvent.

* If you need the money, consider your age. Withdrawals are penalty-free for 401(k) accounts if you are 55 or older. You still owe taxes based on your regular bracket. With an IRA, it's penalty-free after age 59-1/2 (other than for college or a first home).