401(K) ROLLOVER

Wondering if you are making the right moves with your 401k?

Check out these strategies you can implement during employment, when preparing for retirement and post-retirement to make sure you get the most out of your 401k.

Before deciding which option is best for you, it is important to understand the advantages and disadvantages of each choice.

There are many ways to deal with your 401(k) and maximize its worth. We can help you find the best solution depending upon your financial situation and personal preferences.

Leaving your retirement funds at your former employer.

Advantages

Convenience – Leaving your retirement dollars where they are can be an easy choice since it doesn’t require any action.
Low Fees – Fees that are passed on to employees by employer retirement plans are typically little to none.

Disadvantages

Limited Investment Options– Most 401(k) plans only offer a handful of investment options to choose from.
Self-Directed – You are responsible for managing your retirement money which requires time and knowledge. Many people benefit from receiving professional advice.
401(k) Loans – Depending on the plan, you may be required to pay back any loans taken after separation from service, which may be sooner than you initially planned. If you need a loan, you may not be able to initiate one eithe

Move your retirement money to a new employer retirement plan.

Advantages

Simplicity – All of your former and current retirement contributions will be in one place and on one quarterly statement. Unfortunately, not all employer plans accept money from other retirement plans.
Low Fees – Fees that are passed on to employees by employer retirement plans are typically little to none. However, these fees can increase if that company no longer employs you.
New 401(k) Loans – If your new plan allows, you can take out a loan of 50% of the account value, or $50,000 (whichever is less), that must be paid back within 5 years.
Potential to Delay Distributions – You can delay your required minimum distributions (RMDs) until you retire, although your new plan can require you take distributions after you reach age 70 ½.

Disadvantages

Limited Investment Options – Most 401(k) plans only offer a handful of investment options to choose from. Your new 401(k) plan may also have inferior options to your previous plan.
Self-Directed– You are responsible for managing your retirement money which requires time and knowledge. Many people benefit from receiving professional advice.

Move your retirement money into an IRA account.

Advantages

Wide Choice of Investments – IRAs can utilize the vast array of investment choices: stocks, bonds, mutual funds and/or ETFs
Investment Guidance – You can receive as much help and advice as you would like with managing your retirement assets to help you stay on track for retirement.

Disadvantages

Higher Fees – There can be annual account fees, transaction fees, advisory fees and higher cost funds (low cost funds designed for a 401(k) may not be available in an IRA)
Additional Accounts – Your retirement funds will be in two places instead of one and you will receive two statements.
No Loan Provisions – Regardless of the IRA type, loans are not permissible. This also extends to IRA based employer plans.

Take your account as a distribution (aka “cash out”).

You will have to pay taxes on the entire distribution and if you are under age 59 ½ you would be subject to an additional 10% penalty.
Loss of potential growth, which would continue to grow tax deferred until retirement.
If you wish to deposit your check into a new retirement account, you must deposit the entire amount including taxes withheld, and you have a window of 60 days to do so or any taxes and penalties would apply.
If you have an immediate need for the funds, you should check with an advisor and/or tax professional as you may qualify for a hardship that would allow for a partial distribution without penalties.

There are varying fees, tax treatment, underlying investment options, and risks associated with each of the above options.
Therefore, it is important to work with a qualified financial planner to help you fully understand the process and make a well-informed decision on what is best for you.

Request a complimentary meeting or phone call to discuss your 401(k) rollover options.

To learn more about Insight Wealth Strategies, call us at (800) 318-7848, email us at [email protected] or Request More Information.

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