401(k) Rollover in Country Life Acres, MO. Changing jobs or careers is the start of a brand new, exciting chapter in your life. However, it’s often difficult for Country Life Acres, MO residents to know what to do with their existing 401(k) plan. Managing multiple retirement savings accounts can be complex and a pain in the neck.
401(k) Rollover in Country Life Acres,MO
There are several options for handling your 401(k) rollover in Country Life Acres, MO, and oftentimes it takes trustworthy financial planning and an experienced financial advisor to know how to best deal with your savings. 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 confidence that we’ll do what’s best for you. We offer unbiased, 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 Country Life Acres, MO.
Typically, 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, Country Life Acres, 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 residents of Country Life Acres, 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. 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 roll over the funds at some point in the future.
However, it should be mentioned that if you don’t rollover your old 401(k), you won’t be able to add to your savings, 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 oversee several different retirement plans with numerous recordkeepers. 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.
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2. Roll Over Your 401(k) to Your New Employer
If your new employer in Country Life Acres, 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 you prefer the new plan’s options to your 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 in the workforce.
If you have company stock in your previous 401(k) portfolio, 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 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 used to move money from a former employer’s 401(k). If you’ve already opened an IRA, you can consider moving the savings 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, the tax status of your previous contributions stays the same.
Traditional IRA
Contributions made to a Traditional IRA are considered to be pre-tax money. 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 have to take out 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 at the time the contributions are made. The benefit is that you do not pay taxes when you withdraw the money. Money you contributed to a Roth 401(k) account is usually rolled into a Roth IRA. At any time you can withdraw the contributions you make 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. 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 start an IRA account with many banks or any brokerage firm in Country Life Acres, MO, however many of them vary when it comes to 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.
The fourth option is typically not 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 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 Country Life Acres, MO
There are two ways to rollover 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 firm has its own way of doing things, 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, the funds are paid directly to you, and you deposit the savings directly into your IRA or new 401(k). This is also referred to as a 60-day rollover because the money needs to be deposited into the new account within 60 days in order to avoid paying income taxes and early withdrawal penalties.
Like cashing out a 401(k), an indirect rollover is usually not a good idea unless circumstances dictate you need money now. Your Country Life Acres, MO financial advisor will help you understand what the best way to proceed is.
Avoiding Common 401(k) Rollover Mistakes
Even for Country Life Acres, MO residents with a solid understanding of their finances, deciding on the best option for your 401(k) rollover can be complicated. 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 not longer be able to contribute to it, and a new account may offer other benefits that are not offered by your current plan.
- Not opening a new account first — If you do open up an IRA or new 401(k), it's important 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 think it is a regular contribution that you might have to pay taxes on.
- Forgetting about your 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 savings could significantly impact what you have available for your golden rules.
- Forgetting about the same property rule — Any savings that you roll over must be the "same property." Meaning, you can't withdraw cash 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 under 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% penalty tax on any excess amount.
- Not speaking to a retirement planner — 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 offer a full range of other financial services in Country Life Acres, MO:
- 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 people in Country Life Acres, 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 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 Country Life Acres, MO today.
