401(k) Rollover in Imperial, MO. Changing jobs or careers is the start of a brand new, exciting chapter in your life. However, many Imperial, MO residents wonder what the best options are for their 401(k) with their previous employer. Managing multiple retirement savings accounts can be complex and take more time than many people are willing to put in.
401(k) Rollover in Imperial,MO
There are several options for handling your 401(k) rollover in Imperial, MO, and oftentimes it takes sound financial planning and a savvy financial advisor to know which option is best for you. Correct Capital is an independent advisory firm with fiduciary advisors. This means any advice we give is based on what we believe is best for your financial needs. Our business is built on trust and your belief that we’ll do what’s best for you. We offer objective, 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 Imperial, 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), the majority of Imperial, MO companies permit you to keep your accrued savings in their plan. The funds stay subject to the same rules, fees, investment plans, and withdrawal options. Many residents of Imperial, 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 not roll over your 401(k), and to keep the savings where they are. 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. 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 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 a hassle to oversee several different retirement plans with several different recordkeepers. Withdrawal options can be limited and large amounts of your money will be withheld. 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 job in Imperial, MO also offers a 401(k), most employers will allow you to roll over your 401(k) savings to their plan. You may consider this 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, you will not be required to withdraw required minimum distributions after you turn 72 if you are still in the workforce.
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 not contain all the benefits of your previous one. A knowledgeable financial advisor will help you decide if a 401(k) rollover or sticking with your previous plan is right 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 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 how you contributed to your 401(k) plan, you may roll money to a Traditional or a Roth IRA. This way, you maintain your tax status with the money you have contributed.
Traditional IRA
Money deposited into a Traditional IRA may be tax-deductible. Your pre-tax money you contributed to 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. Once you turn 72, you will be obligated to withdraw required minimum distributions regardless of your status in the workforce.
Roth IRA
Money deposited into Roth IRAs are made with money you already paid taxes on, so you’ll need to wait until the money is withdrawn to see a tax benefit. The benefit is that you do not pay taxes when you withdraw the money. Money you contributed to a Roth 401(k) account is often rolled into a Roth IRA. At any time you can withdraw the contributions you make without having to pay taxes, and if you maintain the account for at least 5 years and are 59 ½ years old, you do not pay taxes on your earnings. 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 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 Imperial, 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.
This last option is typically not 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 the account immediately.
Indirect vs. Direct 401(k) Rollovers in Imperial, MO
There are two different ways to actually move the funds in 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 plan you are rolling your funds 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 for their process.
- Indirect rollover — In an indirect rollover, the funds are paid directly to you, and you deposit the savings 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 typically not advisable unless circumstances dictate you need money now. Your Imperial, MO financial advisor will help you understand what the best way to proceed is.
Avoiding Common 401(k) Rollover Pitfalls
Even for Imperial, MO residents with a good grasp of their finances, 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 considering a rollover — If you like many aspects of 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 offer other benefits your current plan doesn't.
- Not opening a new account first — If you do rollover your 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.
- Neglecting your old 401(k) — While you might be surprised that people lose track of their retirement savings, Americans accidentally abandoned almost $8 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 how much you put away for retirement.
- 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 assets 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 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 have to pay a 6% excess IRA contribution tax.
- Not consulting with 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 assist Imperial, 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
Call 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 Imperial, 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 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 decide how to best manage your 401(k) rollover. Call 877-930-4015 or reach out to our financial advisors in Imperial, MO today.
