401(k) Rollover in Olivette, MO. Starting a new job is an exciting time that can present you with new challenges and opportunities. However, it’s often difficult for Olivette, MO residents to know what to do with their existing 401(k) savings. Managing multiple retirement savings accounts can be complex and take more time than many people are willing to put in.
401(k) Rollover in Olivette,MO
There are several options for handling your 401(k) rollover in Olivette, MO, and usually it takes knowledgeable financial planning and an experienced financial advisor to know how to best deal with your savings. Correct Capital is a privately owned 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 confidence 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 Olivette, 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 Olivette, 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 residents of Olivette, 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 roll over the funds any time 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 withdraw “required minimum distributions” from those 401(k) accounts you have at old employers. It can also be a hassle to oversee 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 job in Olivette, MO also offers a 401(k), most employers will permit you to roll over your 401(k) savings 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, 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 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 not contain all the benefits of your previous one. A knowledgeable financial advisor will help you decide if a 401(k) rollover or sticking with your previous plan is right for you.
3. Open a Rollover IRA
IRA stands 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 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, you maintain your tax status with the money you have contributed.
Traditional IRA
Money deposited into a Traditional IRA may be tax-deductible. Your 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 obligated to take out required minimum distributions regardless of whether or not you are still in the workforce.
Roth IRA
Contributions to 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 Roth IRA money grows tax-free. Money you contributed to a Roth 401(k) account is likely to be rolled into a Roth IRA. At any time you can take out the money you’ve invested without tax consequences, 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. 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 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 Olivette, MO, however many come with varying 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.
The fourth 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 may 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 Olivette, 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 IRA or 401(k). Each custodian is different, so the best first step is to reach out to your previous employer's 401(k) company to ask them how to proceed.
- 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 referred to as a 60-day rollover because you need to redeposit the money 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 now. Your Olivette, MO financial advisor will help you understand what the best way to proceed is.
Avoiding Common 401(k) Rollover Pitfalls
Even for Olivette, MO residents with a good grasp 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 are:
- Not weighing all your options — If you like some aspects of 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 account may 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), 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 lost almost $8 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.
- Not taking into account the same property rule — Any savings that 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. If you do that, you would have to pay property tax, 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% penalty tax on any excess amount.
- Not consulting with a retirement planner — 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 Olivette, 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
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 Olivette, 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 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 Olivette, MO today.
