401(k) Rollover

Considering a 401(k) Rollover? Here are Your Options

401(k) plans are designed to help individuals save for retirement through tax-deferred contributions that allow you to build up your savings somewhat quickly because taxes aren't paid on the money until you retire or leave your job.

And one great thing about a 401(k) is that your money is easy to move around since you can roll it over into other investments after leaving a job. But what should you do with it?

Here are four easy options:

1. Let Your Former Employer Keep Your 401(k)

If you're considering a job change but aren't quite sure which employer's plan is right for you, this is a good option to consider. By letting a former employer keep your savings, you have more time to evaluate the investment options and plan details of a new employer's plan.

Pros

  • Any earnings remain tax-deferred until withdrawal.
  • You might have access to loans, distribution plans, and other services that might not be available with a new 401(k) or IRA.
  • Under federal law, your 401(k) is still protected from a claim by creditors.
  • Your former employer's plan may offer lower investment fees than a new 401(k) or IRA.

Cons

  • You can no longer contribute to your former employer's 401(k).
  • Your range of investment choices may be limited.
  • Managing multiple plans might be a bit hectic.
  • Fees and expenses for your new employer's 401(k) might be higher than those of your former 401(k) or IRA.
<b>2. Roll Over the Cash Into an IRA</b>

2. Roll Over the Cash Into an IRA

Whether you are aging out of your employer-sponsored plan, retiring early, or switching jobs, rolling over your 401(k) to a Traditional IRA may give you more flexibility in managing your savings. Traditional IRAs are tax-deferred retirement accounts that help you maintain maximum control over investment decisions.

Pros

  • Your savings have a chance to grow tax-deferred.
  • A 401(k) rollover to IRA gives you investment options that may not be available in a new employer's plan or your former employer's 401(k).
  • An IRA rollover simplifies management by consolidating several retirement accounts.
  • Depending on your IRA provider, you might have access to additional services like investing tools and guidance.

Cons

  • You can't borrow against an IRA.
  • Sometimes IRA rollovers may need annual or maintenance fees.
  • Your IRA assets are only protected from creditors if you file for bankruptcy.

3. Roll Over into a New Employer's Plan

A rollover allows you to take your 401(k) plan with you when you leave your old employer. If your new employer accepts the rollover, you can leave your money in your old account or transfer it to the account with your new employer.

Pros

  • Having a single 401(k) makes it easier to manage your investments.
  • Rolling over to your new employer's plan gives your money a chance to grow tax-deferred.
  • Your assets are protected against creditors.
  • Many new plans offer lower costs.

Cons

  • Not all employers accept rollovers from previous employers.
<b>4. Cash Out If You Must</b>

4. Cash Out If You Must

Unless you know what you're doing, don't just withdraw your money. Withdrawing all of the money from your account is a very costly move in the long term. Any cash you withdraw is taxable, not forgetting the 20% federal holding rate.

Pros

  • Having cash at hand could be helpful if you're in need.

Cons

  • Taxes and penalties are steep.
  • The savings no longer grow tax-deferred.

When should I roll over?

There is a standard 60-day rollover requirement. Exceptions may be granted in extenuating circumstances.

Want To Make Sure a 401(k) Rollover Is Your Best Choice?

What to do with an old 401(k)? It's not always clear-cut. Trying to figure out how to retire is complicated. There are so many different things to consider, questions to ask, and pieces of information to gather... which can be tough to overcome if you don't have all the right information. It can be overwhelming.

Everyone is different, so of course, everyone's situation will be unique. The biggest thing to remember is that the rules among retirement plans vary, so it's important to find out the rules your former employer has as well as the rules at your new employer.

Your best bet is to work with a professional to get the most out of any financial decision you make.

That's Where We Come In

At Garlesky Insurance Agency, we understand the importance of a 401(k) rollover and how it can help you secure your financial future. For over 40 years, the professionals at Garlesky Insurance Agency have been working hard to earn a reputation as one of the leading insurance and finance agencies in America.

If you're interested in a rollover or IRA-Transfer, calling the 401(k) rollover experts at Garlesky Insurance Agency is the best first step. We'll help you determine which course of action is best for your situation, so you can move forward with confidence.

Contact us today for a free consultation.