401(k) Rollover in Brentwood, MO. Changing jobs or careers is the start of a brand new, exciting chapter in your life. However, many Brentwood, MO residents wonder what the best options are for their existing 401(k) savings. Managing multiple retirement savings accounts can be stressful without a team of expert and honest financial advisors.
401(k) Rollover in Brentwood,MO
There are a few different ways to handle your 401(k) rollover in Brentwood, MO, and oftentimes it takes sound financial planning and a savvy financial advisor to know how to best deal with your savings. Correct Capital is a privately owned firm whose advisors hold themselves to the fiduciary standard. This means our only concern is making sure your financial future and planning needs are met. Our business is built on trust and your confidence that we’ll do what’s best for you. We offer impartial, expert advice, and will never try to convince you of something we don’t believe in ourselves. Call us today at 877-930-4015 or contact us online to learn more about 401(k) rollover options in Brentwood, MO.
Normally, 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 Brentwood, 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 employees in Brentwood, 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 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. keeping your assets in your original 401(k) frees you from having to make rushed decisions about where to place your money, and you’re still free to transfer the funds whenever you’d like.
However, it is important to note that keeping your old 401(k) means you can no longer make contributions to it, which may have an effect 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 a hassle to manage several different retirement plans with several different recordkeepers. 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.
2. Roll Over Your 401(k) to Your New Employer
If your new employer in Brentwood, MO also offers a 401(k), most of the time they will allow you to roll over your 401(k) funds to their plan. You may consider this 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 in the workforce.
If you have company stock in your previous 401(k) portfolio, you may have 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 keeping your 401(k) funds where they are is best for you.
3. Open a Rollover IRA
IRA stands for Individual Retirement Account. A Rollover IRA is an account opened to move money from a former employer’s 401(k). If you already have an IRA, you can consider moving the funds there for your 401(k) rollover. Depending on how you contributed to your 401(k) plan, it may be best to roll money to a Traditional or a Roth IRA. This way, you maintain your tax status with the money you have contributed.
Traditional IRA
Contributions made to 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. Once you turn 72, you will have 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 money you already paid taxes on, so there is no tax benefit until the money is withdrawn. The benefit is that Roth IRA money grows tax-free. Money you contributed to a Roth 401(k) account is often rolled into a Roth IRA. At any time you can withdraw the money you’ve invested without having to pay taxes, 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. Contrary to Roth 401(k) contributions, there are no required minimum distributions in a Roth IRA.
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 Brentwood, 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 one that suits your needs.
4. Cash Out.
This last option is rarely advisable unless you are in urgent need of money now. You will be subjected to a 20% federal tax, 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 could result in a large amount of your funds 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 Brentwood, MO
There are two different ways to actually move the funds in your 401(k):
- Direct rollover — In a direct rollover, your former 401(k) company 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 has its own way of doing things, so the best first step is to reach out to your previous employer's 401(k) company for their process.
- Indirect rollover — In an indirect rollover, you withdraw the funds from your account, and then you deposit the funds directly into your new account. This is also known 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 generally not a good idea except under specific circumstances. Your Brentwood, MO financial advisor will help you understand what the best way to proceed is.
Avoiding Common 401(k) Rollover Pitfalls
For even the most financially literate Brentwood, MO residents, deciding what 401(k) rollover options is best for you isn't easy. The most common pitfalls people make when considering their options are:
- Not weighing all your options — If you like some aspects of 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 offer other benefits your current plan doesn't.
- Not opening a new account first — If you do rollover your 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 when they aren't expecting a rollover, they may think it is a regular contribution that could be subject to taxes.
- Neglecting your old 401(k) — While you might be surprised that people lose track of their retirement savings, Americans lost almost $8 billion in retirement savings in 2015. A new job brings a lot of life changes with it, but accidentally leaving behind your retirement funds could significantly reduce how much you put away for retirement.
- Not taking into account the same property rule — Any savings that you roll over must be the "same property." Meaning, you can't take a cash distribution from your 401(k), buy assets with it and move those assets into a new account. If you do that, you would have to pay property tax, and if you're less than 59½ you'll also be subject to a 10% early withdrawal penalty.
- Rolling over a required minimum distribution — There is no way to roll over a required minimum distribution. If you do, you will be subject to a 6% excess IRA contribution tax.
- Not working with 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.
Other services we offer in Brentwood, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
- 401(k) For Small Business
Call a 401(k) Rollover Advisor Today
What to do with your 401(k) from your previous job depends on your unique situation. Many residents of Brentwood, 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 vast array of investment research that we’ll share with you. 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 make the best decision for your 401(k) rollover. Call 877-930-4015 or reach out to our financial advisors in Brentwood, MO today.
