Crossroads Capital Management

At Crossroads Capital Management, we don’t simply advise our clients on their finances. With us, it is personal. Everything we do, we put our heart and spirit into. We are passionate about ensuring that each and every unique client we serve has a financial plan that is as diverse as they are. With our data-driven three-step process, we carefully assess, plan, and manage your every financial concern. Our clients do not look at us as brokers. We are the light that guides them on the path to a successful financial life. Our clients know that they can come to us with any questions or concerns they have. The doors at Crossroads Capital Management are always open. We are trusted friends and confidants to many. Come and discover how we go above and beyond expectations.

401(k) Rollover

A 401(k) rollover is the transfer of funds from a 401(k) into either an individual retirement account (IRA) or a new 401(k). The Internal Revenue Service (IRS) gives 60 days from the date the funds are removed from the originating plan to complete the transfer into the new account. If you leave a job or any reason where you have a company-sponsored 401(k) plan, you must choose what to do with those funds. There are various options available to you, including completing a 401(k) rollover into a new employer’s plan, bank rollover options, or completing an IRA rollover. An IRA rollover offers retirement savers numerous benefits.

IRA Rollover

There are many benefits to completing a 401(k) rollover to an IRA. Benefits of a 401(k) rollover to IRA include having more diverse investment choices than a 401(k) plan and having lower account fees. In fact, many individual retirement accounts do not charge fees at all. 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 account, ask your employer for a direct rollover or adhere to the IRA 60 day rule, and select your investments. A financial advisor can help decide where would be best to allocate retirement funds, and that kind of account would work best for you and your unique situation. A Roth IRA rollover is taxed upon completion, and a traditional IRA rollover is tax-deferred. If you complete a rollover from a Roth 401(k) to a Roth IRA, though, you won’t incur any additional taxes at the time of the rollover.

401(k) Rollover Rules

401(k) rollover rules can vary based on your personal situation. For example, the type of 401(k) and kind of retirement account you are looking to rollover your 401(k) into will make a difference as to the amount of taxes you may need to pay, fees you may incur, as well as any other consequences. This is why it is vital to get a financial advisor involved in your 401(k) rollover. A financial advisor will know the ins and outs of 401(k) rollover rules and be able to guide you to make the best decision for you and your unique situation and to avoid a potentially unexpected tax burden.

Keep in mind that a traditional 401(k) is funded with pre-tax income. Taxes on these retirement savings funds are due upon qualified withdrawal. A Roth IRA is funded with post-tax money, so you pay taxes upfront. Therefore, these funds will be tax-free upon qualified withdrawal. You can avoid an immediate tax burden by dispersing pre-tax funds into a traditional IRA and post-tax fund into a Roth IRA. Each year, the Internal Revenue Service (IRS) evaluates the maximum contribution limits for 401(k) plans and other retirement savings vehicles. They can make changes to these limits annually as needed. Those retirement savers who have reached age 50 may be eligible to make “catch-up” contributions in addition to the annual limitations set forth.

Key Takeaways

Remember that it is crucial to keep in mind the tax implications when completing a 401(k) rollover. You must act before time is up. Inaction can cause an unexpected tax burden or additional fees. If you’re unsure or have questions, be sure to get a financial advisor involved in your 401(k) rollover. Making sure your 401(k) is being handled correctly is vital to your financial future. Contact us today to learn about 401(k) rollover options available to you.