401(k) Rollover

First, you have to decide what kind of account you want to put your money into. Working with a financial planner can help you determine whether you want to make your 401(k) rollover to an IRA or another 401(k) plan.

The benefits of these 401(k) rollover options depend on a few factors. So, it's important to understand the 401(k) rollover rules. If you are moving to a new employer with a 401(k) plan, you will have the option to do a rollover to their plan once you enroll. However, if your new employer does not have a 401(k) plan or does not match your funds, you might want to consider rolling your money over into an IRA.

You can lean on your financial planning advisor to help you make the option in your best interest that meets your risk profile and goals. Once you have an account open, whether it's another 401(k) or an IRA, you can begin rolling your money into the new account.

There's some paperwork to fill out, and you may have to have a few conversations with your financial planning advisor or the administrator of the account you choose.

Typically, we recommend performing a direct rollover. This is the simplest method for you and can prevent any miscommunication or misunderstanding that you withdrew the funds for any other purpose. By specifying a direct rollover, you can ensure that the check from your current plan won't be made out to you. A check-in your name could trigger a 20% withholding tax plus an extra 10% bonus penalty charged by the IRS if you make a withdrawal before age 59 1/2.

While each institution has its own process, the 401(k) administrator will usually send a check to the new IRA or 401(k). Sometimes, your current 401(k) administrator will transfer the money via wire or digitally.

You have 60 days to move your funds into a new account after you withdraw them from your old one. If you forget or fail to move the funds within the allowed time, it could result in negative consequences. It's a good idea to work with your financial planner to understand the consequences, such as penalties and tax liabilities.

Also, keep notes on who you speak to if you talk directly to the new plan administrators or customer service representatives. This is a great backup if the IRS or anyone else questions it down the road.

Yes! You can begin contributing to your new employer's plan as soon as you are eligible. You'll need to open up the plan with your new employer before transferring your old 401(k) over. For assistance, turn to the HR department or plan administrator at your new company. They can advise you what paperwork you need to fill out before making the transfer. If you need general advice on how much to contribute to the new plan, speak with your financial advisor so that you can maximize any matching funds made by your new employer.

You can choose a 401(k) rollover to an IRA. It’s possible that a traditional IRA may provide some investment choices that may not exist in your new 401(k) plan. If your new plan does not allow for in plan Roth conversions then an IRA would be a good option if you plan to use this strategy. If your new employer does not have a 401(k) plan, does not offer any matching funds, an IRA rollover might also seem a more attractive option. You can work with your financial advisor to go over the pros and cons of doing a rollover into an IRA. Make sure you roll over the 401(k) to an IRA plan within the 60-day window to avoid penalties or fees. Otherwise, you may find that your 401(k) withdrawal is treated as ordinary income.

Contact the financial advisors at Gold Tree Financial, Inc. for advice and guidance on 401(k) rollovers and retirement planning!