401(k) Rollover in St. Charles County, MO. Starting a new job is an exciting time that can present you with new challenges and opportunities. However, many St. Charles County, MO residents wonder what the best options are for 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 St. Charles County,MO
There are a few different ways to handle your 401(k) rollover in St. Charles County, MO, and usually 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 our only concern is making sure your financial future and planning needs are met. Our business is built on trust and your confidence that we’ll do what’s best for you. We offer objective, 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 St. Charles County, 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), many St. Charles County, 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 St. Charles County, 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. 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 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 complicated to manage 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 choose whether you should stay with your old 401(k) or not.
2. Roll Over Your 401(k) to Your New Employer
If your new employer in St. Charles County, MO also offers a 401(k), most of the time they will let you roll over your 401(k) assets to their plan. This might be the best option 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 if you are still working.
If you have company stock in your previous 401(k) portfolio, 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. 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 opened to move funds from a previous 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, 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 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. After 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 after-tax money, so there is no immediate 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 typically rolled into a Roth IRA. At any time you can access 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 start an IRA account with many banks or any brokerage firm in St. Charles County, 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 the best fit for you.
4. Cash Out.
This last option is almost never 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 could potentially 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 St. Charles County, 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 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, you withdraw the savings from your account, and then you deposit the savings directly into your new account. This is also referred to 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 a good idea except under specific circumstances. Your St. Charles County, 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 St. Charles County, MO residents, 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 many aspects of 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), it's important that the new account is already open, and that your new custodian is expecting a rollover. If they get a check when they aren't expecting a rollover, they may think it is a regular contribution that could be subject to taxes.
- Forgetting about your 401(k) — While you might be surprised that people lose track of their retirement savings, Americans lost almost $8 billion in retirement savings in 2015. A new job brings a lot of life changes with it, 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 withdraw cash from your 401(k), buy stock with it and deposit those new 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 a required minimum distribution. If you do, you will have to pay a 6% excess IRA contribution tax.
- Not speaking to 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 offer a full range of other financial services in St. Charles County, MO:
- 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 St. Charles County, 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 share with you. 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 St. Charles County, MO today.
