Are you changing jobs? Do you have a 401(k) from a former employer? Have you wondered what to do with it? There are some significant advantages to rolling over your old 401(k)’s and employer accounts into one consolidated IRA.
More Investment Options– Unlike 401(k)s, which can have limited investment options, IRAs allow account holders to own many different assets within the account, including 24,000 stocks, 8000 different mutual funds, ETF’s, bonds, and many other investment options.
Fewer Fees – With ERISA, DOL, and the IRS overseeing 401(k)s, additional reporting can cost more money. Also, there are the advisor, custodial, and per participant fees. If your old 401(k) is in any variable annuity products, those costs can be close to 4% in annual fees. Therefore, it is worth investigating the fees you are paying on your old 401(k).
Personal Guidance– With a company 401(k), employees call an 800# to call where they can answer questions but, in most cases, cannot give advice. Rolling over and working with an independent advisor, you can get the help you need making your investment choices with the knowledge that they are looking at your whole financial picture.
Keep Saving – Once you have left your job, you cannot continue to contribute to the company’s 401(k); moving to an IRA will allow you to contribute new money to your future retirement. In 2021, you can contribute $6k, and if you are 50 or older, up to $7k. But even if you can save only a little bit a month, you are investing in your future.
Roth Conversion Option– Once it’s in a Traditional IRA, you can speak with your advisor and CPA about considerations around shifting money from a pre-Tax account to a post-Tax account. This may save you money in the future when you are ready to retire.
Estate Planning Benefits-In many cases, withdrawal from a 401(k), 403(b) or 457 plan, your beneficiary will receive one lump sum. In an IRA, they will allow you to stretch payments out over lifetime if a spouse or 10 years if a non-spouse Designated beneficiary.
Better Communication- If you leave your 401(k)account with your old employer, you might not get the updates you deserve. You might be out of the loop regarding the plan changes or how to get in touch with an advisor or administrator. News is often distributed through company email or could be sent to outdated contact information.
We would love to help with all your financial planning needs. Scarlet Oak Financial Services can be reached at 800.871.1219 or contact us here.
