401(k) Rollover in Fairview Heights, IL

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401(k) Rollover in Fairview Heights, IL. Starting a new job is an exciting time that can present you with new challenges and opportunities. However, it’s often difficult for Fairview Heights, IL residents to know what to do with their existing 401(k) plan. Managing multiple retirement savings accounts can be stressful without a team of expert and honest financial advisors.


401(k) Rollover in Fairview Heights,IL

There are a few different ways to handle your 401(k) rollover in Fairview Heights, IL, and oftentimes it takes knowledgeable financial planning and an experienced financial advisor to know how to best deal with your savings. Correct Capital is an independent advisory 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 Fairview Heights, IL.

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, Fairview Heights, IL 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 Fairview Heights, IL 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 any time 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 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 numerous 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 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 Fairview Heights, IL also offers a 401(k), most of the time they will permit you to roll over your 401(k) funds 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, required minimum distributions may be delayed even after you turn 72 if you are still in the workforce.

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 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 is an abbreviation for Individual Retirement Account. A Rollover IRA is an account opened to move funds from an old employer’s 401(k). If you’ve already opened 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

Contributions made to a Traditional IRA may be tax-deductible. the pre-tax money you paid into 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 be obligated to withdraw required minimum distributions regardless of whether or not you are still 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 take out the money you’ve invested without having to pay taxes, 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. Different from 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 Fairview Heights, IL, 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 what’s right for you.

4. Cash Out.

The fourth option is almost never 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 might 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 Fairview Heights, IL

There are two different ways to actually move the funds in your 401(k):

  1. 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 firm is different, so the best first step is to reach out to your previous employer's 401(k) company to ask them how to proceed.
  2. 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 called 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 advisable except under specific circumstances. Your Fairview Heights, IL financial advisor will help you understand what the best way to proceed is.

Avoiding Common 401(k) Rollover Mistakes

For even the most financially literate Fairview Heights, IL residents, deciding what 401(k) rollover options is best for you isn't easy. The most common mistakes people make when considering their options are:

  • 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 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 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 by surprise, they may think it is a regular contribution that could be subject to taxes.
  • 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 neglecting to do anything about your 401(k) could significantly impact what you have available for your golden rules.
  • Not taking into account 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 stock with it and move those assets into a new account. The IRS considers that taxable income, 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 have to pay a 6% excess IRA contribution tax.
  • Not speaking to a retirement planner — Financial advisors are well-versed in 401(k) rollovers, proper procedure, and the pro and cons of each of your options.

Other services we offer in Fairview Heights, IL include:

401k Rollover Fairview Heights, IL | Financial Advisors | Retirement Planning Near Fairview Heights

Call a 401(k) Rollover Advisor Today

Your unique situation will dictate which 401(k) option is best for you. Many residents of Fairview Heights, IL 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 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 Fairview Heights, IL today.

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