401k Rollover Options

What to do with your former employer’s retirement plan depends on your personal goals, financial needs, and priorities. Everyone’s situation is different, and there are many factors you’ll want to take into consideration when deciding what’s right for you. There are pros and cons with each decision, and a few are irreversible, so they need to be carefully discussed with a financial professional.

  1. Roll over the assets to a traditional IRA. This allows you to continue growing your retirement savings tax-deferred. This may also give you access to additional investment choices than you previously had. You may also choose to have this professionally managed, which may add an additional cost.
  2. Leave the assets in your former employer’s plan, if you’re happy with your plan’s investment options. The plan rules and RMD rules will still apply, and you’ll oversee investment decisions.
  3. Move the assets to your new employer’s plan, if your new plan’s investment options are appealing. You should confirm that rollovers are accepted, and there are no restrictions on the timing of the transaction or amount you can rollover. You’ll be subject to the new plan’s rules, and you’ll oversee investment decisions.
  4. Convert all or a portion of the assets to a Roth IRA. Unlike a tax-deferred traditional IRA, a Roth IRA grows tax-free. However, you’ll be required to pay federal and state income tax on the amount of the conversion for that tax year.
  5. Withdraw the assets in a lump-sum distribution. This gives you immediate access to your assets. However, your withdrawal will be subject to federal and state income tax, and potentially a 10% penalty for an early withdrawal if you’re under age 59 1/2, or under 55 and separated from service.

Position Wealth is here to help! Contact us if you’d like advice on your rollover options!

This publication is designed to provide general information regarding the subject matter covered. It is not intended to serve as legal, tax, or other financial advice related to individual situations. Because each individual’s legal, tax, and financial situation is different, specific advice should be tailored to the particular circumstances. For this reason, you are advised to consult with your own attorney, CPA, and/or other advisors regarding your specific situation

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