Participants of employer-sponsored retirement plans typically have several options available upon the termination of service from the sponsoring company. If you are considering rolling over money from an employer plan into an IRA, consider the following in deciding whether a rollover is right for you.
Additional factors not listed here may play a meaningful part in your decision. TrueWealth Advisors does not provide tax advice. You should consult a tax professional concerning tax consequences.
Have You Recently Changed Careers?
As you reach the later years of your career, a traditional way of approaching retirement is to keep your assets in an old 401(k), continuing to set money aside until it is time to cash out. However, many mature adults find that they aren’t satisfied with the idea of simply waiting out the proverbial clock and that they can still provide great value in other roles.
It has become increasingly common for professionals in the baby boomer generation to make moves in the late stages of their careers, finding new success and satisfaction in roles like career coaching, mentoring, and vision-casting. Now more than ever, you have the options and resources to make your next career move count.
If you find yourself in the middle of a career change, don’t just roll over. You still have so much more to give in your career, to your family, and in your wealth-building strategy.
Keeping your retirement savings with an old 401(k) may generally be the easiest move, but that can come with drawbacks of its own. Instead, you may want to consider taking a more proactive approach and roll your 401(k) savings into an Individual Retirement Account (IRA).
There are a number of things to consider:
Rolling 401(k) savings over into an IRA will grant you a greater degree of freedom in how you choose to invest your money. Whereas many 401(k)s are limited to a relative handful of mutual funds, IRAs allow you to choose from a broad range of investments. The options provided by an IRA can more easily fit your strategy to meet your financial goals.
Employers usually have an administrator or advisor assigned to their 401(k) plans. These administrators will typically try to keep employers informed on any significant news, either through face-to-face meetings, company-wide emails, or in some cases, traditional mail. While this works for keeping current employees up to speed, people who no longer work for that employer may have trouble getting in touch about their old 401(k) savings. By rolling over to an IRA, you can benefit from more open lines of communication, because the people managing your account are working for you, not for your employer.
Trusted Local Advisor
Moving your 401(k) into an IRA that’s run by a local advisor means that you will experience a higher level of personalized customer service. It also means you get to choose a CERTIFIED FINANCIAL ADVISOR™ professional who is also a fiduciary instead of a corporate third party chosen by your former employer. Fiduciaries put your interests above their own, regardless of how they are compensated. That means you can trust them to do what’s best for you.
Continuing to Contribute
If your next career move involves self-employment, part-time work, or an employer that simply doesn’t offer a retirement plan, a traditional 401(k) may not be an option. An IRA will allow you to continue building on your investments regardless of where your career takes you.
Qualified retirement plan assets are generally subject to unlimited protection from creditors under federal law. On the other hand, IRA assets are only protected in the event of a bankruptcy. State laws vary with respect to how IRA assets are protected in the event of a lawsuit, so make sure you know your state’s laws.
Required Minimum Distributions
If an employee is still working at age 72, he or she is generally not forced to take required minimum distributions from his or her retirement plan. However, with an IRA, required minimum distributions must be taken at age 72, regardless of circumstance.
Are you still unsure if you should roll over your 401(k)?
While there are many reasons to consider rolling your 401(k) over to an IRA, it’s important to remember that there is no such thing as a one-size-fits-all strategy for building wealth. Everyone’s financial situation and goals are unique to them, and an approach that works for one person may not work for another.
With this in mind, TrueWealth’s CERTIFIED FINANCIAL PLANNER™ professionals can help you with your post-retirement strategy and how to leave the legacy you desire.
When it comes to achieving your goals and getting peace of mind, don’t just roll over. Call TrueWealth today to see if rolling over your 401(k) makes sense for you, and discuss your overall financial plan.