Most are
confused and intimidated when it comes to thinking about a 401k rollover. There a few things
that need to be considered when doing a rollover to a 401k. A few points are
listed below to provide 401k rollover assistance.
Do a
“trustee-to-trustee” transfer.
- A
trustee-to-trustee transfer means the check is made out to the new
institution you are setting up your IRA with.
- When
you do a trustee-to-trustee transfer there is no limit to the amount of
transfers you can do.
- If
you do what is call a “60 day rollover” you are limited to only ONE per
year
60 day rollover rule.
- This
applies when the check is made out to you.
- There
will be a mandatory 20% tax withholding.
- You
MUST have the fund in an IRA within 60 days from the receipt of the
funds. There are no exceptions.
- Funds not deposited within 60 days are considered income and subject to tax and penalty.
Reasons to
leave it in a company plan
- There
is an exemption of the 10% early distribution penalty if you are at least
55 in the year of separation.
- Loan
provisions
You can do
these things yourself but, there are 401k rollover specialist that will assist
you. You never should have to pay an advisor to do the 401k rollover. There may be a fee to
manage the assets but not to do the 401k transfer.
Reason to rollover your 401k
The economy
has put many in the position of job transition. This creates the need for
people to decide if they should rollover their 401k. One big questions is,
“what are the reasons to do a rollover your 401k? So, here are a few
reasons you might consider before rolling over your 401k.
1. When you
have an IRA you usually have many more
options than in a 401k. Most likely your 401k is very limited in the investment
options.
2. A 401k plan is the “company plan” not “your own plan.” The company makes all the decisions for your 401k. They
determines the fees you are going to pay. They determine the investment
options you have to choose from.
3. With an IRA you have
the ability to convert to a ROTH IRA.
4. Your IRA can become a, Stretch IRA.
5. You can
invest you IRA in a fixed annuity.
6. You have
the ability to consolidate accounts.
7. No taxes
are due when you do a rollover to an IRA.
8. You can
gain access to professional advise for your IRA plan.
9. Creditor
protection (The Bankruptcy Reform Act passed by Congress in 2005 gives IRAs
widespread protections when federal bankruptcy rules are used).
10. Estate planning with an IRA is easier.
These are just
a few reasons to consider before doing a rollover. There are many more
reasons and more details to be considered before actually doing an rollover to an IRA.
Our office is located at, 4101 Lake Boone Trail, Raleigh NC 27529.