401(k) Rollover in Oakland, MO. Changing jobs or careers is the start of a brand new, exciting chapter in your life. However, it’s often difficult for Oakland, MO residents to know what to do with 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 Oakland,MO
There are several options for handling your 401(k) rollover in Oakland, MO, and oftentimes it takes trustworthy financial planning and an experienced 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 unbiased, 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 Oakland, 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), the majority of Oakland, 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 Oakland, 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, federal law dictates that 401(k)s creditors cannot make claims against 401(k)s. 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 should be mentioned 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 daunting to manage several different retirement plans with several different custodians. 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 job in Oakland, MO also offers a 401(k), most employers will let you roll over your 401(k) savings 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, guidance, 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 part of your previous 401(k) portfolio includes company stock, 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 not contain all the benefits of your previous one. 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 opened to move money from an old employer’s 401(k). If you already have an IRA, you can consider transferring the money 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, the tax status of your previous contributions stays the same.
Traditional IRA
Money deposited into 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. Upon turning 72, you will be required to withdraw required minimum distributions regardless of your status in the workforce.
Roth IRA
Savings 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 usually rolled into a Roth IRA. At any time you can withdraw the contributions you make without tax consequences, 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. 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 Oakland, 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 final option is typically not advisable unless you are in grave 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 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 the account immediately.
Indirect vs. Direct 401(k) Rollovers in Oakland, 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 your new plan. Each custodian is different, 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 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 typically not advisable unless circumstances dictate you need money in the short term. Your Oakland, MO financial advisor will be able to help you determine which option is best.
Avoiding Common 401(k) Rollover Mistakes
Even for Oakland, MO residents with a good understanding of their finances, deciding on the best option for your 401(k) rollover can be complicated. The most common pitfalls people make when considering their options include:
- Not considering a rollover — 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 have tools and resources that are not offered by your current plan.
- Not opening a new account first — If you do rollover your 401(k), make sure 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 could be subject to taxes.
- Neglecting your old 401(k) — While this may sound strange, Americans lost $7.7 billion in retirement savings in 2015. A new job brings a lot of life changes with it, but accidentally leaving behind your retirement funds could significantly impact how much you put away for retirement.
- 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 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 a required minimum distribution. If you do, you will be subject to a 6% excess IRA contribution tax.
- Not working with a financial advisor — Financial advisors are well-versed in 401(k) rollovers, proper procedure, and the advantages and disadvantages of each of your options.
We also assist Oakland, 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
Your unique situation will dictate which 401(k) option is best for you. Many people in Oakland, 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 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 Oakland, MO today.
