401(k) Rollover in St. Peters, MO. Changing jobs or careers is the start of a brand new, exciting chapter in your life. However, many St. Peters, MO residents wonder what the best options are for their 401(k) with their previous employer. Managing multiple retirement savings accounts can be stressful without a team of expert and honest financial advisors.
401(k) Rollover in St. Peters,MO
There are several options for handling your 401(k) rollover in St. Peters, 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, 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. Peters, MO.
Normally, 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 St. Peters, 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. Peters, 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. 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 move the funds any time you’d like.
However, it should be mentioned 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 oversee several different retirement plans with several different custodians. 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. Peters, MO 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 the new plan’s features are preferable to the previous plan’s, including lower fees, better investment options, opportunities, insight, 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 also contain higher fees or less diverse investment options. An experienced financial advisor will help you decide if your personal needs dictate that 401(k) rollover or keeping your funds in your previous plan is best for you.
3. Open a Rollover IRA
IRA is an abbreviation for Individual Retirement Account. A Rollover IRA is an account used to move money from an old employer’s 401(k). If you already have an IRA, you can consider moving the funds 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.
Contributions made to 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. When you turn 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 there is no tax benefit until the money is withdrawn. The benefit is that you do not pay taxes when you withdraw the money. 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 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. 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. Peters, 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 final option is hardly ever advisable unless you are in urgent 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 funds 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 your pocket immediately.
Indirect vs. Direct 401(k) Rollovers in St. Peters, MO
There are two ways to rollover 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 plan. Each custodian follows a different procedure, 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, the funds are paid directly to you, and you deposit the savings directly into your IRA or new 401(k). This is also called 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 generally not advisable unless circumstances dictate you need money now. Your St. Peters, MO financial advisor will help you understand what the best way to proceed is.
Avoiding Common 401(k) Rollover Pitfalls
Even for St. Peters, MO residents with a good grasp of their finances, a 401(k) rollover is not something most people have experience with. The most common mistakes people make when considering their options are:
- 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 account may have tools and resources that are not offered by your current plan.
- Not opening a new account first — If you do rollover your 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.
- Neglecting your old 401(k) — While this may sound strange, Americans lost $7.7 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.
- Neglecting the same property rule — Any savings that you roll over must be the "same property." 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 under 59½ you'll have to pay a 10% early withdrawal penalty.
- Rolling over a required minimum distribution — You are not allowed 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.
We also offer a full range of other financial services in St. Peters, MO:
- 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
- Retirement Planning
Call a 401(k) Rollover Advisor Today
Your unique situation will dictate which 401(k) option is best for you. Many people in St. Peters, 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 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. Peters, MO today.