401(k) Rollover in Ladue, MO. Starting a new job is an exciting time that can present you with new challenges and opportunities. However, it’s often difficult for Ladue, MO residents to know what to do with their existing 401(k) savings. Managing multiple retirement savings accounts can be stressful without a team of expert and honest financial advisors.
401(k) Rollover in Ladue,MO
There are several options for handling your 401(k) rollover in Ladue, MO, and usually it takes knowledgeable financial planning and a savvy financial advisor to know which option is best for you. 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 314-930-401K or contact us online to learn more about 401(k) rollover options in Ladue, MO.
Generally speaking, you have four options to consider when considering a 401(k) rollover.
1. Keep Your 401(k) With Your Former Employer
If you have over $5,000 invested in your 401(k), most, but not all, Ladue, 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 employees in Ladue, 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. 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 at some point in the future.
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 daunting to oversee 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 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 Ladue, MO 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 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 working.
If the benefits with your previous 401(k) included company stock, 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 you should stick with your previous plan or roll over your 401(k) to your new employer.
3. Open a Rollover IRA
IRA stands for Individual Retirement Account. A Rollover IRA is an account used to move money from a former employer’s 401(k). If you’ve already opened an IRA, you can consider moving the money 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 your previous contributions stays the same.
Money deposited into 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. Once you turn 72, you will be obligated to withdraw required minimum distributions regardless of whether or not you are still in the workforce.
Contributions to 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 typically rolled into a Roth IRA. At any time you can take out the contributions you make 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. Unlike 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 Ladue, 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 one that suits your needs.
4. Cash Out.
This last option is hardly ever advisable unless you are in serious 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 funds 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 the account immediately.
Indirect vs. Direct 401(k) Rollovers in Ladue, 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 plan. Each custodian 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, you withdraw the funds from your account, and then 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 unless circumstances dictate you need money in the short term. Your Ladue, MO financial advisor will be able to help you determine which option is best.
Avoiding Common 401(k) Rollover Mistakes
Even for Ladue, MO residents with a good grasp of their finances, a 401(k) rollover is not something most people have experience with. The most common pitfalls you should avoid are:
- Not weighing all your options — If you like your current 401(k) plan, you may be better off sticking with it. But you would not longer be able to contribute to it, and a new plan 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 to open a new account first and inform your new custodian that they'll be receiving a rollover check. If they get a check when they aren't expecting a rollover, they may think it is a regular contribution that you might have to pay taxes on.
- Forgetting about your 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.
- Forgetting about the same property rule — Any savings that you roll over must be the "same property." Meaning, you can't take a cash distribution 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 an RMD. If you do, you will be subject to a 6% excess IRA contribution tax.
- Not consulting with 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.
We also assist Ladue, MO residents with:
- Fiduciary Financial Advisor
- 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
Speak to 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 Ladue, 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 founded 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 decide how to best manage your 401(k) rollover. Call 314-930-401K or reach out to our financial advisors in Ladue, MO today.