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401k Rollovers

What We Can Do For You

At Innovative Advisors, INC, our only focus is the client. We have worked hard to create a space where we can serve all of the needs of individuals and business owners near Elko, NV.  What we do best is help our clients succeed financially. Keeping the client, and only the client, in mind is what makes us significantly different than most financial professionals. As an independent firm, we can recommend products and services that are best for the client and their unique situation. We do not worry about making sales or earning commissions. Our success is equal to the success of our clients.

401(k) Rollover

A 401(k) rollover is the transfer of funds from a 401(k) employer-sponsored plan to an individual retirement account (IRA) or a new 401(k) plan. The IRS gives 60 days from the date that the funds are removed from the original 401(k) plan for the funds to be put into a new retirement savings vehicle; otherwise, the owner incurs fees and/or penalties from the IRS. If you leave a job where you have an employer-sponsored 401(k), you must decide what to do with the money in the account. There are many options available, including completing a 401(k) rollover into your new employer’s plan, a bank rollover option, or a rollover into an individual retirement account (IRA). One of the most beneficial options in many cases is the IRA rollover.

IRA Rollover

There are many benefits to completing a 401(k) rollover to an IRA. These include having more diverse investment selections than the standard 401(k) plan and potentially lower account fees. Many individual retirement accounts do not charge any account fees. A 401(k) rollover to IRA can be broken down into four essential steps, choose the type of IRA account to open, open the new IRA, ask for a direct 401(k) rollover to IRA or follow the IRS 60 day rule, and select your investments. A financial advisor is a valuable resource to help you decide where to allocate retirement savings funds and choose the most beneficial account type for your individual needs. A Roth IRA rollover is taxed upon completion. A traditional IRA rollover is tax-deferred. Except if you complete a Roth 401(k) rollover to a Roth IRA, additional taxes will not be assessed on those Roth funds.

401(k) Rollover Rules

It can be challenging to sort through the many 401(k) rollover rules. They are based on your situation. The kind of 401(k) you had initially and which type of account you are going to roll it into can make a difference in whether or not you must pay taxes, fees, penalties, or other consequences. All of which is why it is so important to get a financial advisor to assist you with your 401(k) rollover. A financial advisor knows the ins and outs of all 401(k) rollover rules and will help you avoid any unexpected tax obligations. Some things that you’ll need to keep in mind:

  • Traditional 401(k)s are funded with pre-tax income. Therefore, you will owe taxes on these funds upon qualified withdrawal.
  • A Roth IRA is funded with after-tax dollars, so you must pay taxes upfront. However, qualified withdrawals from a Roth IRA are then tax-free.
  • Immediate tax implications can be avoided by dispersing post-tax funds to a Roth IRA and pre-tax funds to a traditional IRA.
  • Each year, the IRS reviews the maximum contribution limits for 401(k) plans and other retirement savings accounts. Sometimes they decide to change these limits.
  • Individuals aged 50 or over may make “catch-up” contributions above the regular annual limits.  

Key Takeaways

The bottom line is that there are a few things you must think about when deciding whether or not a 401(k) rollover is right for you, including fees, the range/quality of investments in your 401(k) versus an IRA, and the rules of the 401(k). Remember that you must take action as inaction can cause unnecessary fees. Are you thinking of rolling over your 401(k)? We know what your options are and want to help you make the right choices. Give us a call to make a plan!

Take Charge of Your 401(k)

Keep up with your financial needs while avoiding common (and expensive) rollover mistakes. We put together this guide to help you potentially save thousands in taxes and fees, tips for speeding up retirement preparations, and critical mistakes to avoid.

Are You Making the Most of Your 401(k)?

In this ebook, we outline your 401(k) choices and explore critical mistakes to avoid. Download it today

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