retention of 401(k) statements

[BP.]

After participating for many years in employer 401(k), and retaining all statements, client has switched employers and transferred the entire 401(k) balance into a rollover IRA.

Do you recommend retaining all those statements from the old 401(k)? Thx!

[KBTS]

PA Reason

If they are a PA resident, they might need to know their contributions to the 401k should they decide to take an early disbursement from the IRA. They could use the "cost recovery" method outlined in the DOR Personal Income Tax Guide chapter 7. They probably do not need all those statements, but it might be a good idea to go through and calculate their contributions versus the employer match.

[BP.]

Excellent point, KBTS! I should've thought of that, what with all the clients who take premature distributions and have no documentation to prove to PA their cost in their plans. Is that a pain, or what?

[KBTS]

I know...when I get a client who does that and I ask if they have any idea of what they put into the account, most of the time they look at me like I am crazy. Of course once I explain that they will pay tax on the entire amount if they do not come up with a basis, they usually start making some phone calls or looking through old paperwork to get the amount.