Is a 401(k) Rollover Right For You?

IRA Roth 401(k) nest eggs

 

 

 

Do you have a 401(k) from a previous employer? Do you know what your options are regarding that 401(k)? We can help you to evaluate what’s best for you.

When you leave a job and you don’t want to leave your 401(k) assets in your former employer’s plan, you basically have three options:

1.  You may establish an IRA account and do a rollover of your 401(k) assets. (A rollover is a movement of assets from an old retirement plan into a new and different type of retirement plan.)

2.  You may be able to make a rollover to your new employer’s retirement plan, which could be another 401(k) plan, a 403(b) plan, a 457 plan, profit-sharing plan, etc.

3.  You may elect to cash out your 401(k) assets. However, doing so would require you to pay income taxes on the entire taxable portion of the 401(k) distribution. You may also be subject to a 10% penalty assessed by the IRS if you are under the age of 59.5 at the time of the distribution.

In most cases, it makes more sense to not leave your assets in your old retirement plan. However, we don’t just automatically assume this on your behalf. Rather, we walk you through an analysis of the account features with your old plan in comparison to the features of a Rollover IRA account that we could manage for you. Dickinson Investment Advisors has selected Charles Schwab & Co., Inc. (Schwab) as primary custodian for our clients’ accounts. Here are the key account features for such a comparison:

  • Beneficiary arrangements:  Some 401(k) plans offer a spouse-only beneficiary designation. With a Schwab IRA, you can designate your beneficiaries to be your spouse, children, other relatives, personal trust, or a charitable organization.

 

  • Investment choices:  Many 401(k) plans have a limited amount of funds from which to choose, whereas in a Schwab IRA that we manage for you there are many more mutual funds, ETFs, and alternative investments available for investing your money.

 

  • Liquidity of the assets:  It is worth understanding how easy or difficult it would be to access your money, if you would need it for an emergency or critical need.

 

  • Fees:  Many 401(k) plans have hidden fees that are not transparent, and these fees could be higher. In contrast, we do not charge commissions, and we avoid hidden costs. Our annual management fee is set forth in a straightforward and transparent manner and is based on the net value of the assets in your account.

We assist you in evaluating what is appropriate and suitable for you, in keeping with your tax situation, your risk tolerance, your income needs, and your goals and dreams for retirement.

We would be glad to visit with you in person about these matters. Give us a call at 712-256-4856.

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