401(k) Rollover in Jefferson County, MO. Starting a new job is an exciting time that can present you with new challenges and opportunities. However, it’s often difficult for Jefferson County, MO residents to know what to do with 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 Jefferson County,MO
There are a few different ways to handle your 401(k) rollover in Jefferson County, 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 an independent advisory firm whose advisors hold themselves to the fiduciary standard. 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 314-930-401K or contact us online to learn more about 401(k) rollover options in Jefferson County, MO.
Normally, 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, Jefferson County, 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 people in Jefferson County, 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 transfer the funds whenever you’d like.
However, it should be mentioned 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 take out “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 numerous 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 decide if sticking with your old 401(k) is the best option for you.
2. Roll Over Your 401(k) to Your New Employer
If your new employer in Jefferson County, MO also offers a 401(k), most employers will permit 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, advice, or loan options. Also, you will not be required to withdraw required minimum distributions after you turn 72 as long as you are still working.
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 not contain all the benefits of your previous one. 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 used to move savings from an old employer’s 401(k). If you’ve already opened an IRA, you can consider transferring the funds 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 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. Once you turn 72, you will be obligated to withdraw required minimum distributions regardless of whether or not you are still in the workforce.
Savings deposited into 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 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 access the money you’ve invested without having to pay taxes, and your earnings are not taxed if you keep your account for at least 5 years, and are at least 59 ½ when funds are withdrawn. 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 Jefferson County, 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 the best choice for you.
4. Cash Out.
The fourth option is almost never advisable unless you are in desperate 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 potentially 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 Jefferson County, MO
There are two ways to rollover your 401(k):
- Direct rollover — In a direct rollover, the custodian holding your 401(k) savings will send a check directly to your new retirement account with instructions to put the money into your new plan. Each custodian runs differently, 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 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 in the short term. Your Jefferson County, MO financial advisor will be able to help you determine which option is best.
Avoiding Common 401(k) Rollover Pitfalls
For even the most financially literate Jefferson County, MO residents, a 401(k) rollover is not something most people have experience with. 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 be doing yourself a disservice not to consider how a rollover could allow your money to grow more, or have tools and resources 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), 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 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 retirement funds 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 withdraw cash from your 401(k), buy assets 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 have to pay 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 be subject to a 6% excess IRA contribution tax.
- Not working with a retirement planner — Financial advisors are well-versed in 401(k) rollovers, proper procedure, and the pro and cons of each of your options.
We also assist Jefferson County, MO residents with:
- 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)
Contact a 401(k) Rollover Advisor Today
What to do with your 401(k) from your previous job depends on your unique situation. Many people in Jefferson County, 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 wealth of investment research that we’ll provide you with. 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 Jefferson County, MO today.