Author: Connie Fortney – 401(k) Rollover Specialist
What is a 401(k) Rollover?
Depending on one’s circumstances, rolling a present 401(k) to an Individual Retirement Account (IRA) is the best way for Savers to maximize their options. This moving money from one type of retirement account to a different type of retirement account is called a rollover. There are two types and they are very different:
a) Direct rollover – where money is transferred from one account to another, and no money is withheld for taxes
b) Indirect rollover – where you cash out your old retirement plan and re-invest the new money in at least 60 days. 10-20% of the money is withheld for taxes.
What are the advantages of Rolling over a 401(k) vs. leaving it with the former employer?
Assuming you roll your 401(k) to an IRA with a retirement planning specialist such as ourselves, the Saver will have many more investment options along with the ability to secure Mailbox Money for life. Also, working with a full-service retirement planning firm gives you more planning options plus personalized service experts who are trained in specific areas of retirement planning.
What is the typical mistake people make when rolling over their 401(k)?
a) Investing in things they don’t understand
b) Purchasing long-term investments without a written game plan – many of these investments are not liquid or come with huge surrender charges. A written game plan will allow you to coordinate all of your investments so that you have access to your money when you need it.
c) Not knowing when they can use and enjoy the money
d) Withdrawing money at the wrong time and therefore, paying unnecessary taxes.
e) Waiting till age 70 ½ to use and enjoy it.
f) Placing the money with a money manager charging high fees (anything over 1% per year is too high).
g) Leaving it in risky investments
Benefits to working with a 401(k) Rollover Specialist…
It is always important to have a financial game plan – especially during uncertain times. It’s also important to be aware of what your options are. The rollover options for 401(k) and Roth 401(k) are something to be discussed with a Retirement Planning Specialist. You want to make sure after tax/Roth money is not included in pretax totals and rolled into an IRA by mistake. Let US help YOU avoid making this mistake!
Who is eligible for a rollover?
a. Terminated from work for any reason at any age
b. Plant or company closing
c. Reaching the age of 59 ½ (in most cases)
d. Fully retired
e. QDRO (divorce from a spouse with a 401k)
