401(k) Rollover in Clarkson Valley, MO. Starting a new job is an exciting time that can present you with new challenges and opportunities. However, it’s often difficult for Clarkson Valley, MO residents to know what to do with their existing 401(k) savings. Managing multiple retirement savings accounts can be complex and a pain in the neck.
401(k) Rollover in Clarkson Valley,MO
There are several options for handling your 401(k) rollover in Clarkson Valley, MO, and oftentimes it takes knowledgeable financial planning and an experienced financial advisor to know which option is best for you. Correct Capital is a privately owned 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 unbiased, 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 Clarkson Valley, MO.
Typically, 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, Clarkson Valley, MO companies permit 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 Clarkson Valley, 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 transfer the funds at some point in the future.
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 a hassle 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 choose whether you should stay with your old 401(k) or not.
2. Roll Over Your 401(k) to Your New Employer
If your new position in Clarkson Valley, MO also offers a 401(k), most employers will permit you to roll over your 401(k) assets to their plan. This might be the best option if the new plan’s features are preferable to the previous plan’s, including lower fees, better investment options, opportunities, insight, or loan options. Also, required minimum distributions may be delayed even after you turn 72 as long as 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 not contain all the benefits of your previous one. 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 is an abbreviation for Individual Retirement Account. A Rollover IRA is an account started to move money from an old 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 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, you maintain your tax status with the money you have contributed.
Traditional IRA
Contributions made to a Traditional IRA may be tax-deductible. the pre-tax money you paid into your 401(k) will likely be put into a traditional IRA. Withdrawals from this account may be subject to taxes and an early withdrawal penalty. Upon turning 72, you will be obligated 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 tax benefit at the time the contributions are made. The benefit is that Roth IRA 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 money you’ve invested without tax consequences, and you will not pay taxes on your earnings if you are 59 ½ years old and wait at least 5 years to withdraw any funds. Contrary to 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 Clarkson Valley, 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 last option is seldom advisable unless you are in grave 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 could 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 the account immediately.
Indirect vs. Direct 401(k) Rollovers in Clarkson Valley, 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 plan you are rolling your funds 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 savings from your account, and then you deposit the savings 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 usually not advisable unless circumstances dictate you need money in the short term. Your Clarkson Valley, 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 Clarkson Valley, MO residents, deciding on the best option for your 401(k) rollover can be complicated. The most common mistakes people make when considering their options include:
- Not weighing all your options — If you like many aspects of your current 401(k) plan, you may be better off sticking with it. But you would not longer be able to contribute to it, and a new plan may 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 that the new account is already open, and that your new custodian is expecting a rollover. If they get a check when they aren't expecting a rollover, they may mistake it for a regular contribution that you might have to pay taxes on.
- Forgetting about your 401(k) — While you might think it's hard to 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 savings could significantly impact what you have available for your golden rules.
- Neglecting 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 bonds or another asset 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 under 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 consulting with a financial advisor — Financial advisors deal with investment, tax planning, and other 401(k) rollover considerations every day.
We also assist Clarkson Valley, MO residents with:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
- 401(k) For Small Business
- Small Business Retirement Plans
- Tax Planning
Contact 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 Clarkson Valley, 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 great amount of investment research that we’ll provide you with. We’re founded 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 Clarkson Valley, MO today.
