401(k) Rollover in Manchester, MO. Starting a new job is an exciting time that can present you with new challenges and opportunities. However, it’s often difficult for Manchester, MO residents to know what to do with their existing 401(k) savings. Managing multiple retirement savings accounts can be complex and a pain in the neck.
401(k) Rollover in Manchester,MO
There are several options for handling your 401(k) rollover in Manchester, MO, and usually it takes knowledgeable financial planning and an experienced 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 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 unbiased, 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 Manchester, MO.
In general, 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), the majority of Manchester, 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 employees in Manchester, 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 move the funds whenever 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 continue adding 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 a hassle 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.
Schedule a Meeting With an Advisor Today
Correct Capital Wealth Management's office is physically located in St. Louis, MO, but we serve clients throughout the United States in both personal financial planning and corporate retirement plans.
Schedule a 15-Minute Introductory Call
2. Roll Over Your 401(k) to Your New Employer
If your new position in Manchester, 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 the new plan’s features are preferable to the 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 if you are still in the workforce.
If part of your previous 401(k) portfolio includes 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 also contain higher fees or less diverse investment options. A knowledgeable 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 is an abbreviation for Individual Retirement Account. A Rollover IRA is an account used to move funds from a previous employer’s 401(k). If you already have an IRA, you can consider moving the savings there for your 401(k) rollover. Depending on which type of 401(k) you were contributing to, you may roll money to a Traditional or a Roth IRA. This way, the tax status of your previous contributions stays the same.
Traditional IRA
Contributions made to a Traditional IRA are considered to be pre-tax money. the 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. When you turn 72, you will be required to withdraw required minimum distributions regardless of your status in the workforce.
Roth IRA
Contributions to Roth IRAs are made with after-tax money, so there is no tax benefit until the money is withdrawn. 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 withdraw the money you’ve invested 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. Unlike Roth 401(k) contributions, there are no required minimum distributions in a Roth IRA.
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 open an IRA with many banks or any brokerage firm in Manchester, 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.
The fourth option is seldom 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 could potentially result in a large amount of your withdrawal 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 Manchester, MO
There are two different ways to actually move the money 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 savings into. 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 funds 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 generally not a good idea except under specific circumstances. Your Manchester, MO financial advisor will help you understand what the best way to proceed is.
Avoiding Common 401(k) Rollover Pitfalls
Even for Manchester, MO residents with a solid understanding of their finances, deciding what 401(k) rollover options is best for you isn't easy. The most common mistakes you should avoid 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 offer other benefits that are not offered by your current plan.
- 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 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 neglecting to do anything about your 401(k) could significantly impact 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 deposit those new assets into a new account. The IRS considers that taxable income, and if you're under 59½ you'll also be subject to 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 consulting with 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 Manchester, MO:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
Contact a 401(k) Rollover Advisor Today
Your unique situation will dictate which 401(k) option is best for you. Many people in Manchester, 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 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 Manchester, MO today.
