Let's say you've switched jobs, and you're about to add the balance from your old 401(k) into a new retirement account. Your former employer will cut a check for the balance -- but who the check is made out to can affect whether you have to pay taxes or absorb any penalties.
If the check is made out to you, your employer will withhold 20 percent for taxes. You'll recoup this money after filing your next tax return, but you're required to deposit 100 percent of the money into an account within 60 days, or else you'll be taxed and, if you're too young to make the withdrawal, penalized.
To avoid this pitfall, you need to set up a trustee-to-trustee transfer -- also known as a direct rollover. Talk with the bank that oversees your new account for instructions on to whom the check should be made out, and contact the retirement plan administrator at your old job to ensure the check is made out correctly.