401(k) Rollover in Wentzville, MO. Starting a new job is an exciting time that can present you with new challenges and opportunities. However, it’s often difficult for Wentzville, MO residents to know what to do with their 401(k) with their previous employer. Managing multiple retirement savings accounts can be complex and a pain in the neck.
401(k) Rollover in Wentzville,MO
There are several options for handling your 401(k) rollover in Wentzville, MO, and oftentimes it takes sound financial planning and a savvy financial advisor to know which option is best for you. Correct Capital is a privately owned 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 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 Wentzville, MO.
Typically, 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), most, but not all, Wentzville, 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 people in Wentzville, 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. 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 roll over the funds at some point in the future.
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 take out “required minimum distributions” from those 401(k) accounts you have at old employers. It can also be complicated to manage several different retirement plans with numerous 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 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 position in Wentzville, MO also offers a 401(k), most employers will permit you to roll over your 401(k) assets to their plan. You may consider this if the new plan’s features are preferable to the previous plan’s, including lower fees, better investment options, opportunities, guidance, or loan options. Also, required minimum distributions may be delayed even after you turn 72 if 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 the new account. The 401(k) plan with your new employer may also contain higher fees or less diverse investment options. A knowledgeable financial advisor will help you decide if keeping your 401(k) funds where they are 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 savings from a previous 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 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 your previous contributions stays the same.
Traditional IRA
Money deposited into a Traditional IRA may be tax-deductible. the 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. Upon turning 72, you will be required to withdraw required minimum distributions regardless of your status in the workforce.
Roth IRA
Money deposited into 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 access the contributions you make 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. 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 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 Wentzville, 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 the best choice for you.
4. Cash Out.
This final option is typically not advisable unless you are in urgent 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 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 Wentzville, 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) funds will send a check directly to your new retirement account with instructions to put the money into the IRA or 401(k) you are rolling your savings into. 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, the funds are paid directly to you, and you deposit the savings directly into your new account. This is also known 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 a good idea except under specific circumstances. Your Wentzville, MO financial advisor will help you understand what the best way to proceed is.
Avoiding Common 401(k) Rollover Mistakes
Even for Wentzville, MO residents with a good grasp of their finances, deciding on the best option for your 401(k) rollover can be complicated. The most common mistakes people make when considering their options 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 not longer be able to contribute to it, and a new account may have tools and resources 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 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 mistake it for a regular contribution that you might have to pay taxes on.
- Neglecting your old 401(k) — While you might be surprised that people lose track of their retirement savings, Americans lost almost $8 billion in retirement savings in 2015. A lot can come with moving to a new job, but accidentally leaving behind your savings could significantly impact how much you put away for retirement.
- Neglecting the same property rule — The funds you roll over must be the "same property." Meaning, you can't take a cash distribution 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 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 deal with investment, tax planning, and other 401(k) rollover considerations every day.
We also offer a full range of other financial services in Wentzville, 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
Speak to a 401(k) Rollover Advisor Today
Your unique situation will dictate which 401(k) option is best for you. Many residents of Wentzville, 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 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 decide how to best manage your 401(k) rollover. Call 877-930-4015 or reach out to our financial advisors in Wentzville, MO today.
