Whether you are leaving your current place of employment or searching for alternatives to traditional retirement savings, 401K roll overs may be on your mind. Unfortunately, most people lack the knowledge and experience needed to roll over their retirement savings into a new investment account. Here are a few things to know before you complete your 401k rollover.
Weigh Out Your Options
Many people choose to move their 401k into the same brokerage’s IRA account since this seems to be the easiest option when leaving an employer. However, rolling your 401k into the same brokerage’s IRA is not your only option.
You are able to move your 401k into an IRA at a completely different brokerage firm or you can transfer the 401k into a completely new 401k plan, but these tasks will require a bit of effort on your part. Cashing out your 401k is also a possibility, allowing you to deposit the money in your bank account or another investment portfolio. Unfortunately, this comes with some tax penalties, so financial advisors do not recommend this option.
While there is no right or wrong answer, working with a financial advisor or retirement planner can help you weigh out the options that work best for your needs.
Roll Overs with Fewer Taxes
As stated earlier, cashing out your 401k account could be traumatizing due to the various fees, penalties, and taxes that you will need pay. Thankfully, you can roll over your 401k plan without worrying about paying a high tax rate.
If you are over 55 years old, you can cash out your 401k plan without any tax penalties for withdrawing early.
No matter what your age is, if you choose to roll over your 401k into a traditional IRA, create a tax-free pot of money. This allows you to pay tax on the rolled over amount while allowing you to grow your money without paying high tax rates.
Loans Must Be Paid in Full
Millions of people choose to borrow off of their 401k plan to pay for medical bills or to purchase a home. Before cashing out or rolling over your 401k, you must pay these loans in full.
If you do not pay the loan in full, you will be hit with a large penalty fee that could be up to 10 percent of the borrowed amount. To pay off this loan, you can either continue to make regular payments, even though you are not an employee, or you can take the loan amount out of the remaining 401k savings.
To learn more about 401k roll overs, make sure to contact Jason Graziani in the Frisco, Texas area at (972) 992-1920.
Roll Overs Frisco TX
15150 Preston Road, Suite 300
Dallas, Texas 75248