401(k) Rollover in Rock Hill, MO. Starting a new job is an exciting time that can present you with new challenges and opportunities. However, it’s often difficult for Rock Hill, MO residents to know what to do with their 401(k) with their previous employer. Managing multiple retirement savings accounts can be complex and take more time than many people are willing to put in.
401(k) Rollover in Rock Hill,MO
There are several options for handling your 401(k) rollover in Rock Hill, MO, and usually it takes sound financial planning and an experienced financial advisor to know which option is best for you. Correct Capital is a privately owned firm with fiduciary advisors. This means our only concern is making sure your financial future and planning needs are met. Our business is built on trust and your belief that we’ll do what’s best for you. We offer impartial, 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 Rock Hill, MO.
In general, 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 Rock Hill, 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 people in Rock Hill, 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, federal law dictates that 401(k)s creditors cannot make claims against 401(k)s. 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 whenever you’d like.
However, it should be mentioned 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 oversee 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 choose whether you should stay with your old 401(k) or not.
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2. Roll Over Your 401(k) to Your New Employer
If your new employer in Rock Hill, MO also offers a 401(k), most of the time they will permit you to roll over your 401(k) savings 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, guidance, or loan options. Also, required minimum distributions may be delayed even after you turn 72 as long as you are still working.
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 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 funds from a previous employer’s 401(k). If you’ve already opened an IRA, you can consider transferring the savings 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 contributed to your 401(k) is likely to be rolled over into this account. 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 your status in the workforce.
Roth IRA
Contributions to Roth IRAs are made with money you already paid taxes on, so there is no tax benefit until the money is withdrawn. The benefit is that Roth IRA money grows tax-free. Money you contributed to a Roth 401(k) account is often 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. 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 will pay taxes on the amount received into a Roth IRA as you are “converting” pre-tax money into after-tax money.
You can open an IRA with many banks or any brokerage firm in Rock Hill, 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 one that suits your needs.
4. Cash Out.
This last option is typically not 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 may result in a large amount of your withdrawal going towards taxes and not into your pocket. 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 Rock Hill, MO
There are two different ways to actually move the money in your 401(k):
- Direct rollover — In a direct rollover, the custodian holding your 401(k) savings 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, you withdraw the funds from your account, and then you deposit the funds directly into your new account. This is also known as a 60-day rollover because there is a 60-day time limit for when you can deposit the money, or else you could end up paying income taxes and early withdrawal penalties.
Like cashing out a 401(k), an indirect rollover is typically not advisable except under specific circumstances. Your Rock Hill, MO financial advisor will help you understand what the best way to proceed is.
Avoiding Common 401(k) Rollover Mistakes
For even the most financially literate Rock Hill, MO residents, deciding what 401(k) rollover options is best for you isn't easy. The most common mistakes you should avoid are:
- Not considering all your options — If you like 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 plan may offer other benefits 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), make sure to open a new account first and inform your new custodian that they'll be receiving a rollover check. If they get a check by surprise, they may think it is a regular contribution that could be subject to taxes.
- Forgetting about your 401(k) — While this may sound strange, Americans accidentally abandoned $7.7 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 — The property your new account receives must be the property that was rolled over. Meaning, you can't withdraw cash from your 401(k), buy stock with it and move those 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 — There is no way to roll over an RMD. If you do, you will have to pay 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.
Other services we offer in Rock Hill, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
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 in Rock Hill, 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 decide how to best manage your 401(k) rollover. Call 877-930-4015 or reach out to our financial advisors in Rock Hill, MO today.
