401(k) Rollover in St. Louis, MO. Starting a new job is an exciting time that can present you with new challenges and opportunities. However, it’s often difficult for St. Louis, MO residents to know what to do with 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 usually it takes knowledgeable financial planning and a savvy 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 we work in your best interest to make sure your money is working for you as you want it to. Our business is built on trust and your belief that we’ll do what’s best for you. We offer impartial, 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. Louis, MO.
Normally, 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. Louis, 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 residents of 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 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, per federal law, 401(k)s are generally protected against claims by creditors. keeping your assets in your original 401(k) frees you from having to make rushed decisions about where to place your money, and you’re still free to roll over the funds at some point in the future.
However, it should be mentioned that keeping your old 401(k) means you can no longer make 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 daunting to oversee 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.
2. Roll Over Your 401(k) to Your New Employer
If your new employer in St. Louis, MO also offers a 401(k), most of the time they 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 as long as you are still in the workforce.
If part of your previous 401(k) portfolio includes 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 is an abbreviation for Individual Retirement Account. A Rollover IRA is an account opened to move money from a former employer’s 401(k). If you’ve already opened an IRA, you can consider transferring 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 the money you already invested is not affected.
Money deposited into a Traditional IRA are considered to be pre-tax money. 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. After turning 72, you will have to take out required minimum distributions regardless of your status in the workforce.
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 usually rolled into a Roth IRA. At any time you can take out the money you’ve invested without having to pay taxes, 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 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 the best fit for you.
4. Cash Out.
This final option is typically not 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 might result in a large amount of your withdrawal 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 St. Louis, MO
There are two different ways to actually move the funds 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 firm 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, 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 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 unless circumstances dictate you need money in the short term. Your St. Louis, MO financial advisor will be able to help you determine which option is best.
Avoiding Common 401(k) Rollover Mistakes
Even for St. Louis, MO residents with a solid grasp of their finances, 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 your current 401(k) plan, it may make sense to leave your savings there. But you would be doing yourself a disservice not to consider how a rollover could allow your money to grow more, or have tools and resources your current plan doesn't.
- Not opening a new account first — If you do rollover your 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.
- Neglecting your old 401(k) — While this may sound strange, Americans lost over $7 billion in retirement savings in 2015. A new job brings a lot of life changes with it, but accidentally leaving behind your savings 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 take a cash distribution from your 401(k), buy stock 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 less than 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 speaking to a retirement planner — Financial advisors are well-versed in 401(k) rollovers, proper procedure, and the advantages and disadvantages of each of your options.
Other services we offer in St. Louis, MO include:
- 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
- Social Security Consultants Near Me
- Retirement Calculator
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 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 wealth of investment research that we’ll provide you with. We’re built 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, MO today.