401(k) Rollover in St. Clair County, IL. Changing jobs or careers is the start of a brand new, exciting chapter in your life. However, many St. Clair County, IL residents wonder what the best options are for their 401(k) with their previous employer. Managing multiple retirement savings accounts can be complex and a pain in the neck.
401(k) Rollover in St. Clair County,IL
There are several options for handling your 401(k) rollover in St. Clair County, IL, and oftentimes it takes sound financial planning and advising to know which option is best for you. Correct Capital is a privately owned, 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, and will never try to convince you of something we don’t believe in ourselves. Call us today at 314-930-401K or contact us online to learn more about 401(k) rollover options in St. Clair County, IL.
Generally speaking, 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), many St. Clair County, IL companies allow you to keep your accrued savings in their plan. The funds stay subject to the same rules, fees, investment plans, and withdrawal options. Many employees in St. Clair County, IL 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 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 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 manage several different retirement plans. 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 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 job in St. Clair County, IL also offers a 401(k), most employers will permit you to roll over your 401(k) funds 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, required minimum distributions may be delayed even after you turn 72 if you are still working.
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 also contain higher fees or less diverse investment options. A trustworthy 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 previousemployer’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, you may roll money to a Traditional or a Roth IRA. This way, the tax status of the money you already invested is not affected.
Contributions made to a Traditional IRA are considered to be pre-tax money and may be tax-deductible. the 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 have to withdraw required minimum distributions regardless of your status in the workforce.
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 the 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 having to pay taxes, 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 start an IRA account with many banks or any brokerage firm in St. Clair County, IL, however they often vary in terms of fees or other expenses. Our team of financial advisors at Correct Capital will help you find what’s right for you.
4. Cash Out.
This last option is almost never advisable unless you are in desperate 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 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.
How to rollover your 401(k)
If you decide on a 401(k) rollover, it’s often beneficial to choose a direct rollover, in which 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 firm is different, so the best first step is to reach out to your old 401(k) company for their process.
We also offer a full range of other financial services.
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Contact a 401(k) Rollover Advisor Today
What to do with your 401(k) from your previous job depends on your unique situation. Many residents of St. Clair County, IL 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 founded on trust, honesty, and integrity.
Call us today at 314-930-401K, 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 314-930-401K or reach out to our financial advisors in St. Louis today.