401(k) Rollover in University City, MO

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401(k) Rollover in University City, MO. Starting a new job is an exciting time that can present you with new challenges and opportunities. However, many University City, 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 University City,MO

There are several options for handling your 401(k) rollover in University City, MO, and oftentimes it takes knowledgeable 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 any advice we give is based on what we believe is best for your financial needs. 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 877-930-4015 or contact us online to learn more about 401(k) rollover options in University City, MO.

In general, 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), most, but not all, University City, 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 residents of University City, 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 transfer the funds whenever you’d like.

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 a hassle to oversee several different retirement plans with several different recordkeepers. Withdrawal options can be limited and large amounts of your money will be withheld. You would not be able to take out a 401(k) loan. Correct Capital's retirement consultants can help you decide if sticking with your old 401(k) is the best option for you.


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2. Roll Over Your 401(k) to Your New Employer

If your new position in University City, MO also offers a 401(k), most of the time they will allow 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, 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 working.

If part of your previous 401(k) portfolio includes company stock, you may require 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. 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 started to move money from a previous employer’s 401(k). If you’ve already opened an IRA, you can consider moving the funds there for your 401(k) rollover. Depending on which type of 401(k) you were contributing to, 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.


Traditional IRA

Contributions made to a Traditional IRA are considered to be pre-tax money. 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 be required to take out required minimum distributions regardless of whether or not you are still in the workforce.


Roth IRA

Contributions to Roth IRAs are made with after-tax money, so there is no tax benefit until the money is withdrawn. 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 contributions you make 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. Different from 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 University City, 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 last option is almost never 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 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 the account immediately.



Indirect vs. Direct 401(k) Rollovers in University City, MO

There are two different ways to actually move the money in your 401(k):

  1. Direct rollover — In a direct rollover, the custodian holding your 401(k) funds will send a check directly to your new retirement account with instructions to put the money into the account you are rolling your funds into. 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.
  2. Indirect rollover — In an indirect rollover, you withdraw the funds 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 the money needs to be deposited into the new account within 60 days in order to avoid paying income taxes and early withdrawal penalties.

Like cashing out a 401(k), an indirect rollover is usually not advisable unless circumstances dictate you need money now. Your University City, MO financial advisor will be able to help you determine which option is best.

Avoiding Common 401(k) Rollover Mistakes

For even the most financially literate University City, 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 some aspects of 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 offer other benefits that are not offered by your current plan.
  • Not opening a new account first — If you do rollover your 401(k), make sure that the new account is already open, and that your new custodian is expecting a rollover. If they get a check by surprise, 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 accidentally abandoned over $7 billion in retirement savings in 2015. A lot can come with moving to a new job, but accidentally leaving behind your savings could significantly reduce what you have available for your golden rules.
  • Forgetting about the same property rule — The funds you roll over must be the "same property." 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 — There is no way to roll over a required minimum distribution. If you do, you will be subject to a 6% penalty tax on any excess amount.
  • Not consulting with a financial advisor — Financial advisors deal with investment, tax planning, and other 401(k) rollover considerations every day.

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401k Rollover University City, MO | Financial Advisors | Retirement Planning Near University City

Contact a 401(k) Rollover Advisor Today

Your unique situation will dictate which 401(k) option is best for you. Many in University City, 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 877-930-4015, 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 877-930-4015 or reach out to our financial advisors in University City, MO today.

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