401(k) Rollover in Weldon Spring, MO. Starting a new job is an exciting time that can present you with new challenges and opportunities. However, many Weldon Spring, 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 Weldon Spring,MO
There are several options for handling your 401(k) rollover in Weldon Spring, MO, and usually it takes sound 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 objective, 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 Weldon Spring, MO.
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 Weldon Spring, MO companies permit 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 Weldon Spring, 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, 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 whenever 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 impact 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 numerous 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.
2. Roll Over Your 401(k) to Your New Employer
If your new job in Weldon Spring, MO also offers a 401(k), most of the time they will let you roll over your 401(k) funds to their plan. You may consider this 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, 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 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. An experienced 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 used to move money from a previous employer’s 401(k). If you already have an IRA, you can consider transferring the savings 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, you maintain your tax status with the money you have contributed.
Traditional IRA
Money deposited into a Traditional IRA may be tax-deductible. 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. Upon turning 72, you will be required to take out required minimum distributions regardless of whether or not you are still in the workforce.
Roth IRA
Money deposited into Roth IRAs are made with money you already paid taxes on, so there is no immediate 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 access the money you’ve invested without tax consequences, and your earnings are not taxed if you keep your account for at least 5 years, and are at least 59 ½ when funds are withdrawn. Contrary to 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 Weldon Spring, MO, however many come with varying 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 typically not 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 might result in a large amount of your savings 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 Weldon Spring, 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 custodian has its own way of doing things, 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 typically not a good idea except under specific circumstances. Your Weldon Spring, MO financial advisor will help you understand what the best way to proceed is.
Avoiding Common 401(k) Rollover Pitfalls
Even for Weldon Spring, MO residents with a good grasp of their finances, deciding what 401(k) rollover options is best for you isn't easy. The most common mistakes people make when considering their options include:
- 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 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 open up an IRA or new 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 when they aren't expecting a rollover, they may mistake it for a regular contribution that you might have to pay taxes on.
- Forgetting about your 401(k) — While this may sound strange, Americans accidentally abandoned almost $8 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 reduce what you have available for your golden rules.
- Not taking into account 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 stock with it and deposit those new assets into a new account. The IRS considers that taxable income, 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 a required minimum distribution. If you do, you will be subject to a 6% excess IRA contribution tax.
- Not working with a retirement planner — Financial advisors deal with investment, tax planning, and other 401(k) rollover considerations every day.
We also offer a full range of other financial services in Weldon Spring, MO:
- 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
Call a 401(k) Rollover Advisor Today
Your unique situation will dictate which 401(k) option is best for you. Many residents of Weldon Spring, 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 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 Weldon Spring, MO today.
