The 4 Rollover Options
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The 4 Choices When Rolling Over Retirement Accounts
The pandemic has caused a lot of turmoil in the job market. Many people have been laid off and now have to find a new employer to work for. But what should you do with your retirement account that’s with your old employer? Matt and Nick talk about a few strategies you…
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When someone leaves a job, whether by choice or by job loss, they typically grab a box and clean out their desk and work area so they can take home their personal belongings. Their pictures, their coffee cup, maybe even a plant. Unfortunately, many do not realize that they could be leaving behind their most important asset: Their retirement accounts.
One of the biggest questions people have when leaving their old job has to do with their current retirement accounts, such as a 401(k), 403(b) and others. Can you move it, even if you are not at retirement age yet? Should you leave it where it is? Should you move into the account with your new employer? Or is rolling it into an IRA the best option?
At Income For Life, we know that everyone’s situation is different and what works best for someone won’t necessarily work well for another. That’s why we take a simple, straightforward approach of understanding your needs, setting the options before you, and helping you make the best choice for your financial future. So keep reading to learn about the different options you have with your old retirement accounts. After that, sign up for your free retirement report.
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The 4 Options With Your Retirement When You Leave An Employer
Lump Sum Withdrawal
While there is nothing that forbids you from taking the entire balance of your retirement account and depositing it into your personal checking account, you will be looking at a 10% early withdrawal penalty in addition to being taxed on the full amount. Further, you put a significant dent in your retirement savings. However, there are certain situations, like the COVID-19 pandemic, where certain penalties may be forgiven. However, be sure to talk to a financial advisor before exercising this option to ensure you qualify.
Keep Your Retirement Account Where It Is
Depending on the amount of money you have in the account, as well as your portfolio’s plan, it may work best for you to leave your money where it is. However, for most people (especially those who are apt to forget about their retirement accounts), you’ll be better off finding other options. This is especially true since you’ll be losing any company match you may have had. Many employer-offered retirement plans have little flexibility, so you’re better off finding a new home for your retirement savings.
Transfer Your Retirement Account Over To Your New Employer
Once you are enrolled in a new retirement plan, talk to your old plan administrator to begin the process known as a transfer. This ensures that you are covered from the risk of owing any taxes or missing a deadline. You can also do this through depositing the balance of your old account in the form of a check. However, this needs to be done within 60 days to avoid being taxed on the entire amount. This can be a beneficial move if your new company offers a well-structured and cost-effective retirement plan.
Roll The Money To An IRA
However, retirement accounts with your employer aren’t your only option when it comes to retirement. You can also elect to start an IRA with the funds in your old retirement account. This process is called a rollover, and if it’s done properly, you won’t have to worry about distribution taxes. In the vast majority of situations, the freedom that comes with this option makes it the most attractive option, no matter where you currently are on the road to retirement. The truth is the sky’s the limit when it comes to retirement planning, and it can be tough to wade through all the options. When you partner with Income For Life, you can be confident that we’ll help you make the best decision that will put you on the path to a successful retirement.
The 4 Options With Your Retirement When You Leave An Employer
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