401(k) Rollover in St. Louis, MO. Changing jobs or careers is the start of a brand new, exciting chapter in your life. However, many St. Louis, MO residents wonder what the best options are for their existing 401(k) plan. Managing multiple retirement savings accounts can be stressful without a team of expert and honest financial advisors.
401(k) Rollover in St. Louis,MO
There are a few different ways to handle your 401(k) rollover in St. Louis, MO, and oftentimes it takes trustworthy financial planning and a savvy financial advisor to know how to best deal with your savings. 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 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 St. Louis, MO.
Typically, 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), the majority of St. Louis, MO 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. Louis, 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 move the funds any time you’d like.
However, it is important to note 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 daunting to manage several different retirement plans with several different 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.
Schedule a Meeting With an Advisor Today
Correct Capital Wealth Management's office is physically located in St. Louis, MO, but we serve clients throughout the United States in both personal financial planning and corporate retirement plans.
Schedule a 15-Minute Introductory Call
More From Correct Capital Wealth Management
Explore how Correct Capital Wealth Management can help guide you toward smarter decisions, clearer goals, and lasting financial success.
Subscribe To Our Newsletter Listen To Our Podcast Watch Our YouTube Channel
2. Roll Over Your 401(k) to Your New Employer
If your new position in St. Louis, MO also offers a 401(k), most of the time they will permit you to roll over your 401(k) funds 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, advice, or loan options. Also, required minimum distributions may be delayed even after you turn 72 as long as 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 the new account. The 401(k) plan with your new employer may not contain all the benefits of your previous one. A trustworthy 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 an old 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 which type of 401(k) you were contributing to, 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.
Traditional IRA
Contributions made to a Traditional IRA are considered to be pre-tax money. the pre-tax money you paid into 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 take out required minimum distributions regardless of whether or not you are still in the workforce.
Roth IRA
Savings deposited into Roth IRAs are made with after-tax money, 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 usually rolled into a Roth IRA. At any time you can withdraw the contributions you make 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. 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 open an IRA with many banks or any brokerage firm in St. Louis, 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 what’s right for you.
4. Cash Out.
This last option is typically not advisable unless you are in serious 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 could 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. Louis, 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 account. Each custodian runs differently, 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 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 a good idea unless circumstances dictate you need money now. Your St. Louis, MO financial advisor will be able to help you determine which option is best.
Avoiding Common 401(k) Rollover Pitfalls
Even for St. Louis, MO residents with a solid understanding of their finances, deciding on the best option for your 401(k) rollover can be complicated. The most common pitfalls you should avoid include:
- Not weighing all your options — If you like 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 plan may offer other benefits your current plan doesn't.
- Not opening a new account first — If you do open up an IRA or new 401(k), it's important 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 mistake it for a regular contribution that could be subject to taxes.
- Neglecting your old 401(k) — While you might think it's hard to lose track of their retirement savings, Americans accidentally abandoned over $7 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 reduce 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 bonds or another asset 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 — 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 speaking to 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 offer a full range of other financial services in St. Louis, MO:
- Roth Conversion
- Investment Management
- 401(k) Audit
- High-Net-Worth Wealth Management
- Retirement Planner
- Financial Planning
- Retirement Plan Consultants
- Succession Planning
- Fiduciary Financial Advisor
Call 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. Louis, 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 vast array 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 St. Louis, MO today.
