401(k) Rollover in Arnold, MO. Changing jobs or careers is the start of a brand new, exciting chapter in your life. However, it’s often difficult for Arnold, MO residents to know what to do with their 401(k) with their previous employer. Managing multiple retirement savings accounts can be stressful without a team of expert and honest financial advisors.
401(k) Rollover in Arnold,MO
There are a few different ways to handle your 401(k) rollover in Arnold, MO, and oftentimes it takes trustworthy financial planning and a savvy financial advisor to know which option is best for you. Correct Capital is an 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 belief that we’ll do what’s best for you. We offer objective, expert advice, that we give free of the conflict of interest that can occur with public shareholders or parent company relationships. Call us today at 877-930-4015 or contact us online to learn more about 401(k) rollover options in Arnold, MO.
In general, you have four options to consider when considering a 401(k) rollover.
1. Keep Your 401(k) With Your Previous Employer
If you have over $5,000 invested in your 401(k), the majority of Arnold, MO companies permit you to keep your accrued savings in their plan. The funds stay subject to the same rules, fees, investment plans, and withdrawal options. Many residents of Arnold, MO 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 not roll over your 401(k), and to keep the savings where they are. 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 should be mentioned that keeping your old 401(k) means you can no longer make contributions to it, which may have an impact on your retirement planning. After the age of 72, you will be required to take out “required minimum distributions” from those 401(k) accounts you have at old employers. It can also be complicated to oversee several different retirement plans with several different custodians. Withdrawal options can be limited and large amounts of your money will be withheld. You would not be able to take out a 401(k) loan. Correct Capital's retirement consultants can help you understand if sticking with your old 401(k) is right for you.
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2. Roll Over Your 401(k) to Your New Employer
If your new position in Arnold, MO also offers a 401(k), most employers will allow you to roll over your 401(k) savings to their plan. You may consider this if the new plan’s features are preferable to the previous plan’s, including lower fees, better investment options, opportunities, guidance, or loan options. Also, required minimum distributions may be delayed even after you turn 72 as long as you are still in the workforce.
If part of your previous 401(k) portfolio includes company stock, you may require special financial planning needs when rolling over your 401(k) to the new account. The 401(k) plan with your new employer may also contain higher fees or less diverse investment options. An experienced 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 savings from a former employer’s 401(k). If you’ve already opened 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.
Traditional IRA
Money deposited into a Traditional IRA 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. Upon turning 72, you will be required to withdraw required minimum distributions regardless of whether or not you are still in the workforce.
Roth IRA
Contributions to Roth IRAs are made with after-tax money, so there is no immediate tax benefit. The benefit is that Roth IRA money grows tax-free. Money you contributed to a Roth 401(k) account is usually rolled into a Roth IRA. At any time you can take out the money you’ve invested without tax consequences, and your earnings are not taxed if you keep your account for at least 5 years, and are at least 59 ½ when the money is withdrawn. Different from 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 start an IRA account with many banks or any brokerage firm in Arnold, MO, however many come with varying fees or other expenses. Our team of financial advisors at Correct Capital partners with several trusted financial custodians and will help you find the best choice for you.
4. Cash Out.
This final option is almost never advisable unless you are in serious need of money now. You will be subjected to a 20% federal withholding rate, and could face a 10% 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 may result in a large amount of your withdrawal going towards taxes and not into your back account. 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 your pocket immediately.
Indirect vs. Direct 401(k) Rollovers in Arnold, MO
There are two ways to rollover your 401(k):
- Direct rollover — In a direct rollover, the custodian holding your 401(k) funds will send a check directly to your new retirement account with instructions to put the money into the account you are rolling your savings into. Each custodian runs differently, so the best first step is to reach out to your previous employer's 401(k) company to ask them how to proceed.
- Indirect rollover — In an indirect rollover, you withdraw the funds from your account, and then you deposit the funds directly into your IRA or new 401(k). This is also referred to as a 60-day rollover because you need to redeposit the money within 60 days in order to avoid paying income taxes and early withdrawal penalties.
Like cashing out a 401(k), an indirect rollover is typically not advisable unless circumstances dictate you need money now. Your Arnold, MO financial advisor will be able to help you determine which option is best.
Avoiding Common 401(k) Rollover Pitfalls
Even for Arnold, MO residents with a solid understanding of their finances, a 401(k) rollover is not something most people have experience with. The most common pitfalls people make when considering their options include:
- Not considering all your options — If you like your current 401(k) plan, you may be better off sticking with it. But you would be doing yourself a disservice not to consider how a rollover could allow your money to grow more, or have tools and resources your current plan doesn't.
- Not opening a new account first — If you do open up an IRA or new 401(k), it's important to open a new account first and inform your new custodian that they'll be receiving a rollover check. If they get a check by surprise, they may mistake it for a regular contribution that could be subject to taxes.
- Forgetting about your 401(k) — While this may sound strange, Americans lost $7.7 billion in retirement savings in 2015. A new job brings a lot of life changes with it, but neglecting to do anything about your 401(k) could significantly reduce how much you put away for retirement.
- Not taking into account the same property rule — The funds you roll over must be the "same property." Meaning, you can't take a cash distribution from your 401(k), buy bonds or another asset with it and move those assets into a new account. The IRS considers that taxable income, and if you're less than 59½ you'll also be subject to a 10% early withdrawal penalty.
- Rolling over a required minimum distribution — You are not allowed to roll over a required minimum distribution. If you do, you will have to pay a 6% penalty tax on any excess amount.
- Not speaking to a financial advisor — Financial advisors will be able to help you choose the best plan for you and ensure the rollover goes as smoothly as possible.
We also assist Arnold, MO residents with:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
Speak to a 401(k) Rollover Advisor Today
Your unique situation will dictate which 401(k) option is best for you. Many residents of Arnold, MO 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 provide you with. We’re based on trust, honesty, and integrity.
Call us today at 877-930-4015, 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 877-930-4015 or reach out to our financial advisors in Arnold, MO today.
