401(k) Rollover in Fenton, MO. Starting a new job is an exciting time that can present you with new challenges and opportunities. However, it’s often difficult for Fenton, MO residents to know what to do with their 401(k) with their previous employer. Managing multiple retirement savings accounts can be stressful without a team of expert and honest financial advisors.
401(k) Rollover in Fenton,MO
There are a few different ways to handle your 401(k) rollover in Fenton, MO, and oftentimes it takes sound financial planning and an experienced financial advisor to know which option is best for you. Correct Capital is an independent advisory 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, and will never try to convince you of something we don’t believe in ourselves. Call us today at 314-930-401K or contact us online to learn more about 401(k) rollover options in Fenton, 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), the majority of Fenton, 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 residents of Fenton, 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 roll over the funds at some point in the future.
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 impact 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 complicated to manage 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 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 position in Fenton, MO also offers a 401(k), most of the time they will allow you to roll over your 401(k) assets 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, guidance, or loan options. Also, you will not be required to withdraw required minimum distributions after you turn 72 if you are still working.
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 a new employer. 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 savings from a former 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, you maintain your tax status with the money you have contributed.
Contributions made to a Traditional IRA may be tax-deductible. Your 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. Upon turning 72, you will have to take out required minimum distributions regardless of whether or not you are still in the workforce.
Savings deposited into Roth IRAs are made with money you already paid taxes on, so there is no immediate tax benefit. 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 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. Different from 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 open an IRA with many banks or any brokerage firm in Fenton, 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.
The fourth option is hardly ever advisable unless you are in serious 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 savings 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 Fenton, 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 your new account. Each firm 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 savings directly into your new account. This is also referred to 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 usually not advisable unless circumstances dictate you need money in the short term. Your Fenton, MO financial advisor will be able to help you determine which option is best.
Avoiding Common 401(k) Rollover Mistakes
Even for Fenton, MO residents with a good grasp of their finances, a 401(k) rollover is not something most people have experience with. The most common mistakes people make when considering their options are:
- Not weighing all your options — If you like your current 401(k) plan, it may make sense to leave your savings there. 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 rollover your 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 think it is a regular contribution that could be subject to taxes.
- Neglecting your old 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 accidentally leaving behind your savings could significantly reduce what you have available for your golden rules.
- Neglecting the same property rule — The property your new account receives must be the property that was rolled over. Meaning, you can't withdraw cash from your 401(k), buy bonds or another asset with it and move those assets into a new account. The IRS considers that taxable income, and if you're less than 59½ you'll have to pay a 10% early withdrawal penalty.
- Rolling over a required minimum distribution — You are not allowed to roll over an RMD. If you do, you will be subject to a 6% penalty tax on any excess amount.
- Not speaking to a financial advisor — Financial advisors deal with investment, tax planning, and other 401(k) rollover considerations every day.
We also offer a full range of other financial services in Fenton, MO:
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
- 401(k) For Small Business
- Small Business Retirement Plans
- Tax Planning
- Social Security Consultants Near Me
- Retirement Calculator
- Retirement Planning
- Rollover 401(k)
Speak to a 401(k) Rollover Advisor Today
Your unique situation will dictate which 401(k) option is best for you. Many residents of Fenton, 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 314-930-401K, 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 314-930-401K or reach out to our financial advisors in Fenton, MO today.