401(k) Rollover in Kirkwood, MO. Starting a new job is an exciting time that can present you with new challenges and opportunities. However, many Kirkwood, MO residents wonder what the best options are for 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 Kirkwood,MO
There are a few different ways to handle your 401(k) rollover in Kirkwood, MO, and oftentimes it takes sound 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 any advice we give is based on what we believe is best for your financial needs. Our business is built on trust and your confidence that we’ll do what’s best for you. We offer impartial, 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 Kirkwood, 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 Kirkwood, MO companies allow you to keep your accrued savings in their plan. The funds stay subject to the same rules, fees, investment plans, and withdrawal options. Many people in Kirkwood, 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. 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 any time you’d like.
However, it is important to note 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 complicated 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 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 position in Kirkwood, MO also offers a 401(k), most employers will allow you to roll over your 401(k) funds to their plan. You may consider this if the new plan has better benefits than the previous plan, 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 you have company stock in your previous 401(k) portfolio, you may have 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. A trustworthy financial advisor will help you decide if keeping your 401(k) savings 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 funds from a former employer’s 401(k). If you already have an IRA, you can consider transferring the funds 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 the money you already invested is not affected.
Traditional IRA
Contributions made to a Traditional IRA are considered to be pre-tax money. the pre-tax money you paid into 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. When you turn 72, you will be required to take out required minimum distributions regardless of your status in the workforce.
Roth IRA
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 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 access the money you’ve invested 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 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 Kirkwood, MO, 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.
This final option is rarely advisable unless you are in grave 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 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 Kirkwood, MO
There are two ways to rollover your 401(k):
- 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 the IRA or 401(k) 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 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 generally not advisable except under specific circumstances. Your Kirkwood, MO financial advisor will be able to help you determine which option is best.
Avoiding Common 401(k) Rollover Mistakes
Even for Kirkwood, MO residents with a good understanding of their finances, deciding what 401(k) rollover options is best for you isn't easy. The most common mistakes you should avoid include:
- Not considering a rollover — If you like some aspects of your current 401(k) plan, it may make sense to leave your savings there. But you would not longer be able to contribute to it, and a new account may have tools and resources your current plan doesn't.
- Not opening a new account first — If you do rollover your 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 by surprise, they may mistake it for a regular contribution that you might have to pay taxes on.
- Forgetting about your 401(k) — While this may sound strange, Americans accidentally abandoned $7.7 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 how much you put away for retirement.
- Neglecting the same property rule — The funds 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 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 — There is no way to roll over a required minimum distribution. If you do, you will be subject to a 6% excess IRA contribution tax.
- Not speaking to a financial advisor — Financial advisors will be able to help you choose the best plan for you and ensure the rollover goes as smoothly as possible.
Other services we offer in Kirkwood, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
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 Kirkwood, 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 great amount 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 make the best decision for your 401(k) rollover. Call 877-930-4015 or reach out to our financial advisors in Kirkwood, MO today.
