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Old 401(k) at the Bottom of Your List? You Are Probably Not Ready for Retirement.

Whether you’re making a career change or just got laid off, your 401(k) may be at the bottom of your to-do list. Your financial security in retirement depends on your retirement funds. Always make it your first priority.

If you do not have the time or the interest to focus on your financial security, Curran Wealth Management is here to help. Securing your future is our goal and our number one priority. Changing jobs is a perfect opportunity to review your financial plan. We can help you prepare for the next step in your life and can help you navigate through your 401(k) options. Please contact us at info@curranllc.com or (518) 391-4200.

Moving your 401(k) is an incredibly important step that must be well-thought-out. When leaving an employer, there are typically three workable opportunities to continue the growth of your retirement funds. Understanding which route offers more advantages for continued growth that will align with your next chapter in life is the first step.

Assessment

The first step is to read through your retirement plan's agreement. Doing so will help you understand if your employer plan accepts rollovers as some may not. Ultimately, plan sponsors maintain the membership guidelines. In some cases, your former employer’s plan may allow the sponsor to cash-out the account when you end employment. Withdrawals could trigger income taxes and a 10 percent penalty.1

Before you start, gather any appropriate account statements and contacts. When you signed up for the plan, you may have selected both a traditional 401(k) and a Roth 401(k), but keep in mind these are two separate accounts. Traditional 401(k) contributions are not taxed but are subject to penalties in the case of early withdrawal. Roth contributions, on the other hand, are taxed but withdrawals have no adverse effect as long as the distribution is considered qualified by the IRS.2

It’s a good idea to meet with us before starting the process. You‘ll want to choose the right type of retirement account and avoid paying taxes or penalties for potentially choosing a plan that isn’t right for you. For example, if you decide to roll your 401(k) into a Roth you should prepare to pay taxes on the full amount.

Execute Planning

Curran Wealth Management can help you make informed decisions as you continue saving. We can offer assistance by reviewing your previous employer’s plan and weighing the benefits of your new employer’s retirement plans. More importantly, our involvement will make sure the necessary steps are taken to move your funds with limited repercussions.

Financial Precautions

Depending on the length of your previous employment, it’s a good idea to also check the associated vesting schedules. Vesting schedules are tied to the employer’s contributions and determine the amount and date when the employer’s contributions are legally yours. Your own contributions are fully vested from day one.

Age is another contributing factor when deciding how to approach a former employer’s contributions. For instance, if you switch jobs and turn 55 in the same year, you may withdraw funds from the 401(k) without penalty. Rolling the funds into another 401(k) or IRA imposes a higher age limit of 59½ years to avoid withdrawal penalties, depending on the plan. Talking with a Curran Relationship Manager for advice when making such financial decisions may help you avoid costly mistakes.

It’s important to also keep in mind that your new employer may have a waiting period before you’re able to rollover funds. In this case, your advisor may suggest that you open an investment account to continue contributions during the waiting period. Opening another account allows you to take advantage of the tax deduction until you make your final decision. Keeping investment growth active could be more beneficial for you in the long run.

From old job to new, you’re on the right track by having already started saving for retirement. By working with Curran Wealth Management, you’ll gain further insight and understand the regulations of moving your funds in the most beneficial way. We will also help with navigating any future changes you may encounter.

  1. https://www.irs.gov/newsroom/what-if-i-withdraw-money-from-my-ira
  2. https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-distributions-withdrawals
  3. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

Please check with your Curran Wealth relationship manager,
 
or contact Curran Wealth Management if you have any questions.
 518.391.4200
info@curranllc.com

The material contained in this article is for educational and informational purposes only.  The information herein is considered to be obtained from reference sources deemed reliable, but no representation or warranty is made as to its accuracy or completeness.  This article is not, and should not be regarded as “investment advice” or construed as a “recommendation” or an offer to buy or sell a security.  The information contained in this article may not apply to your personal circumstances.  Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation.  Information on taxes is based on the tax laws existing at the time of publication.  Tax laws are subject to continual change.  In addition, tax laws vary by state.  This article is not, and should not be regarded as tax or legal advice.  We cannot ensure tax consequences of any transaction.  If you would like a detailed analysis of your tax situation, with specific tax recommendations, you can discuss the possibility of pursuing a formal relationship with Hippo Tax Services, LLC.