401(k) Rollover in Greater St. Louis, MO. Starting a new job is an exciting time that can present you with new challenges and opportunities. However, many St. Louis residents wonder what the best options are for their 401(k) with their previous employer. Managing multiple retirement savings accounts can be complex and a pain in the neck.
401(k) Rollover in St. Louis
There are several options for handling your 401(k) rollover in St. Louis, and oftentimes it takes sound financial planning and advising to know which option is best for you. Correct Capital is a privately owned, independent advisory firm with fiduciary advisors. This means we work in your best interest to make sure your money is working for you as you want it to. Our business is built on trust and your confidence that we’ll do what’s best for you. We offer unbiased, expert advice, and will never try to convince you of something we don’t believe in ourselves. Call us today at 314-930-401K or contact us online to learn more about 401(k) rollover options in St. Louis.
In general, you have four options to consider when considering a 401(k) rollover.
1. Keep your 401(k) with your former employer.
If you have over $5,000 invested in your 401(k), most, but not all, St. Louis companies allow you to keep your retirement savings in their plan. The funds stay subject to the same rules, fees, investment plans, and withdrawal options. Many people in St. Louis already like the benefits of their 401(k), such as their investment options, website, or any investing tools or guidance they offer. In this case, it may make sense to keep them where they are instead of a 401(k) rollover. If you leave your job between the ages of 55 and 59 ½, you may be eligible for penalty-free withdrawals. Additionally, per federal law, 401(k)s are generally protected against claims by creditors. If you keep your assets in your old 401(k), you won’t have to make any immediate decisions regarding your money, and you’re still free to move the funds whenever you’d like.
However, it is important to note that if you don’t rollover your old 401(k), you won’t be able to continue adding contributions to it, which may have an impact on your retirement planning. After the age of 72, you will be required to withdraw “required minimum distributions” from those 401(k) accounts you have at old employers. It can also be complicated to manage several different retirement plans. Withdrawal options can be limited and have large federal withholding requirements. You would not be able to take out a 401(k) loan. Correct Capital can help you understand if sticking with your old 401(k) is right for you.
2. Roll over your 401(k) to your new employer.
If your new job in St. Louis also offers a 401(k), most employers will allow you to roll over your 401(k) funds to their plan. This might be the best option if the new plan has better benefits than the previous plan, including lower fees, better investment options, opportunities, guidance, or loan options. Also, required minimum distributions may be delayed even after you turn 72 if you are still working.
If part of your previous 401(k) portfolio includes company stock, you may have special financial planning needs when rolling over your 401(k) to a new employer. The 401(k) plan with your new employer may also contain higher fees or less diverse investment options. A trustworthy financial advisor will help you decide if a 401(k) rollover or sticking with your previous plan is right for you.
3. Open a Rollover IRA.
IRA stands for Individual Retirement Account. A Rollover IRA is an account used to move money from a former employer’s 401(k). If you already have an IRA, you can consider moving the money there for your 401(k) rollover. Depending on how you contributed to your 401(k) plan, you may roll money to a Traditional or a Roth IRA. This way, you maintain your tax status with the money you have contributed.
Contributions made to a Traditional IRA are considered to be pre-tax money and may be tax-deductible. Your pre-tax money you contributed to your 401(k) is likely to be rolled over into this account. Withdrawals from this account may be subject to taxes and an early withdrawal penalty. Once you turn 72, you will have to withdraw required minimum distributions regardless of whether or not you are still in the workforce.
Contributions to Roth IRAs are made with money you already paid taxes on, so there is no immediate tax benefit. The benefit is that the money grows tax-free. Money you contributed to a Roth 401(k) account is likely to be rolled into a Roth IRA. At any time you can access the contributions you make without tax consequences, and if you maintain the account for at least 5 years and are 59 ½ years old, you do not pay taxes on your earnings. Unlike Roth 401(k) contributions, money held in a Roth IRA is not subject to required minimum distributions.
While you may roll pre-tax money from your 401(k) plan into a Roth IRA, you will pay taxes on the amount received into a Roth IRA as you are “converting” pre-tax money into after-tax money.
You can open an IRA with many banks or any brokerage firm in the St. Louis area, however many of them vary when it comes to fees or other expenses. Our team of financial advisors at Correct Capital will help you find what’s right for you.
4. Cash Out
This last option is typically not advisable unless you are in desperate need of money now. You will be subjected to a 20% federal withholding rate, and could face a10% early withdrawal penalty if you take the money out before you are 59 ½ years old or if you separate before 55 years old. This could result in a large amount of your withdrawal going towards taxes and not into your pocket. Additionally, the money won’t keep growing and it will no longer be tax-deferred. Therefore, a 401(k) rollover is preferable if you do not need the money in the account immediately.
How to rollover your 401(k)
If you decide on a 401(k) rollover, it’s often beneficial to choose a direct rollover, in which your former 401(k) company will send a check directly to your new retirement account with instructions to put the money into your new IRA or 401(k). Each firm is different, so the best first step is to reach out to your old 401(k) company for their process.
Contact a 401(k) Rollover Advisor Today
What to do with your 401(k) from your previous job depends on your unique situation. Many in St. Louis have found choosing Correct Capital as their financial advisors to be the best decision for them. Our financial advisors operate under the fiduciary principle, which means that we are legally bound to act in good faith and have your best interests at heart. As Registered Investment Advisors, we have access to a wealth of investment research that we’ll share with you. We’re built on trust, honesty, and integrity.
Call us today at 314-930-401K, contact us online, or schedule an appointment with our financial and retirement planning advisors to decide how to best manage your 401(k) rollover. Call 314-930-401K or reach out to our financial advisors in St. Louis today.