401(k) Rollover in Central West End, MO. Starting a new job is an exciting time that can present you with new challenges and opportunities. However, many Central West End, 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 Central West End,MO
There are several options for handling your 401(k) rollover in Central West End, MO, and usually it takes trustworthy financial planning and a savvy financial advisor to know which option is best for you. Correct Capital is a privately owned firm whose advisors hold themselves to the fiduciary standard. 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 objective, 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 Central West End, MO.
Generally speaking, 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), most, but not all, Central West End, MO 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 Central West End, 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, federal law dictates that 401(k)s creditors cannot make claims against 401(k)s. 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 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 withdraw “required minimum distributions” from those 401(k) accounts you have at old employers. It can also be daunting to manage several different retirement plans with several different custodians. 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's retirement consultants can help you decide if sticking with your old 401(k) is the best option for you.
2. Roll Over Your 401(k) to Your New Employer
If your new position in Central West End, MO also offers a 401(k), most employers will permit you to roll over your 401(k) savings to their plan. This might be the best option if you prefer the new plan’s options to your previous plan’s, including lower fees, better investment options, opportunities, insight, or loan options. Also, you will not be required to withdraw required minimum distributions after you turn 72 as long as you are still working.
If the benefits with your previous 401(k) included company stock, you may require 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 your personal needs dictate that 401(k) rollover or keeping your funds in your previous plan is best for you.
3. Open a Rollover IRA
IRA stands for Individual Retirement Account. A Rollover IRA is an account started to move savings from a previous employer’s 401(k). If you already have an IRA, you can consider transferring the savings there for your 401(k) rollover. Depending on which type of 401(k) you were contributing to, it may be best to roll money to a Traditional or a Roth IRA. This way, the tax status of the money you already invested is not affected.
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 your status in the workforce.
Roth IRA
Savings deposited into Roth IRAs are made with after-tax money, 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 usually rolled into a Roth IRA. At any time you can access 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. Unlike 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 would be “converting” pre-tax money into after-tax money, which means you would have to pay taxes on the money received into the Roth IRA.
You can open an IRA with many banks or any brokerage firm in Central West End, MO, however they often vary in terms of 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 final 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 may 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 your pocket immediately.
Indirect vs. Direct 401(k) Rollovers in Central West End, 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 your new IRA or 401(k). Each custodian follows a different procedure, 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 savings from your account, and then you deposit the funds directly into your IRA or new 401(k). This is also known as a 60-day rollover because there is a 60-day time limit for when you can deposit the money, or else you could end up paying income taxes and early withdrawal penalties.
Like cashing out a 401(k), an indirect rollover is typically not a good idea unless circumstances dictate you need money in the short term. Your Central West End, MO financial advisor will be able to help you determine which option is best.
Avoiding Common 401(k) Rollover Pitfalls
Even for Central West End, MO residents with a solid grasp of their finances, a 401(k) rollover is not something most people have experience with. The most common mistakes you should avoid 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), make sure 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 you might have to pay taxes on.
- Forgetting about your 401(k) — While this may sound strange, Americans accidentally abandoned over $7 billion in retirement savings in 2015. A lot can come with moving to a new job, but neglecting to do anything about your 401(k) could significantly impact what you have available for your golden rules.
- Forgetting about the same property rule — The property your new account receives must be the property that was rolled over. Meaning, you can't take a cash distribution from your 401(k), buy bonds or another asset with it and deposit those new 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 an RMD. If you do, you will have to pay a 6% penalty tax on any excess amount.
- Not working with a retirement planner — Financial advisors are well-versed in 401(k) rollovers, proper procedure, and the pro and cons of each of your options.
We also offer a full range of other financial services in Central West End, MO:
- 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 people in Central West End, 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 built 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 Central West End, MO today.
