Every now and then, someone will ask me whether or not they should endorse a 401k rollover check. The answer to this question is not as straightforward as you might think. Here’s what you need to know.
When you leave your job, you have the option of rolling your 401k into an IRA. If you do this, you will receive a check made out to your new IRA account. In order to deposit the money into your account, you will need to endorse the check.
The question of whether or not to endorse the check comes down to two things: when you need the money and how much you need. If you need the money right away, then it makes sense to endorse the check so that you can deposit it into your IRA and access the funds immediately. However, if you don’t need the money right away, then you might want to hold off on endorsing the check.
This is because there is a 60-day window during which you can roll over your 401k into an IRA without having to pay any taxes or penalties. If you endorse the check and deposit it into your IRA within this 60-day window, then you won’t have to pay any taxes on the money. However, if you wait longer than 60 days to deposit the money, then you will be subject to taxes and penalties.
Therefore, if you don’t need the money right away and can wait to endorsed the check, it might be beneficial to do so in order to avoid paying taxes on the rolled over funds. Of course, this decision ultimately comes down to personal preference and financial circumstances.
Conclusion:
Endorsing a 401k rollover check is not as simple as simply signing your name on the back of the check. You need to consider when you need the money and how much you need before making a decision. If you endorsed the check and deposit it into your IRA within 60 days, then you won’t have to pay any taxes on rolled over funds; however, if you wait longer than 60 days, then taxes and penalties will apply. Ultimately, the decision of whether or not to endorsement should be based on your personal circumstances and financial needs.
