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As you approach retirement, managing your retirement assets is crucial. And if you're changing jobs or retiring, rolling over your 401k to an IRA can give you more control over how your money is invested.
A 401k rollover is simply moving your retirement savings from one account to another. You can do this when you change employers or when you decide that your current employer-sponsored plan doesn't have the investment options you want or need.
There are three ways to do a 401k rollover: direct transfer, trustee-to-trustee transfer, and 60-day rollover. The method used will depend on the amount of money being rolled over and the type of account it's going into.
If you're in the process of changing jobs—or even if you just want to take a step back and reevaluate your retirement planning strategy—then it's likely that you'll have some decisions to make about your 401(k) plan.
Here are four main options for what to do with the money in your old employer's plan.
This is the simplest option, but it does have some downsides. By leaving it with your old employer, you may miss out on important features like investing in different types of funds or the ability to manage your risk level. And if you change jobs again, you'll have to deal with this all over again!
The individual retirement account is a great way to manage your money on a tax-advantaged basis while being able to choose from a variety of investments and tools to help you grow your savings. Plus, it's easy to roll into other plans when you change jobs again.
If you've got a new job lined up, then rolling over into the new employer's plan can be a good way to stay organized and keep track of all your retirement savings in one place.
If you're low on cash and need some extra spending money, then cashing out might make sense—but remember that you'll be taxed at both federal and state levels, so it's not worth it unless you are faced with a serious emergency.
A 401(k) rollover is the process by which an individual can transfer money from his or her employer's 401(k) plan to an IRA account since many 401(k)s allow for this. There are multiple options available to you when considering a rollover, so it is always best to consult with a knowledgeable financial advisor before making a decision.
If you don't roll over your 401(k), there are a few things that could happen.
After you leave your job, you have up to 60 days to decide what to do with the money in your 401(k).
Once that deadline arrives, though, you'll be stuck paying a tax penalty if you don't roll over your 401(k) into an IRA or other retirement account. You could also be forced to pay income tax on all of the money in your 401(k), depending on how old you are when you leave your job.
To avoid penalties, you'll need to move your money directly from your old 401(k) plan to an IRA or a new employer's plan within 60 days of receiving it. The move must be directly from one custodian to another, so you cannot withdraw the money and deposit it into the new account yourself.
We understand that planning for retirement is a very important part of your financial future. Setting up a retirement plan and choosing the right investments is often one of the most intimidating aspects of saving.
That's why at Dees Wealth, we offer our clients our personalized, hands-on approach to planning. We'll take the time to learn about your unique needs and goals so we can give you the best advice possible on how to get the most out of your investments.
Contact us today for more information.
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