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401(k) Rollovers

Your 401(k) is likely to be your single largest retirement asset. Building this asset, and preserving it, is a vital long-term financial strategy. The wrong decision can result in underperformance, substantial taxes, penalties, and an unnecessary reduction of your hard-earned retirement assets.

When we change jobs, we must decide whether we should leave our 401(k) with our old employer, roll it into an IRA, or roll it into your new employer’s plan. Generally, the majority of individuals roll their 401(k) over to an IRA. A Rollover IRA may allow you to maintain the tax-deferred status of your funds and may provide several key advantages, such as:

Under current tax law, it may be possible to avoid a lump sum distribution to your heirs, if you die with the money still in a rollover IRA account. If you are confident that you will not need the funds for your retirement income, you might wish to consider a Stretch IRA. Under this IRA, your beneficiary may elect to take distributions over their life expectancy thereby "stretching" distributions over several tax years. Note: Your heirs can lose this option if you fail to fill out a Designation of Beneficiary Form.
Allowing you greater investment flexibility. You are not restricted to the investments offered through the 401(k).

Providing the opportunity for the investments to be self-directed – managed by you!

Some employers offer the option of rolling your 401(k) into IRAs while you are still employed. Depending on your situation, and the employer’s 401(k) performance, this opportunity could be an important option that you may want to exercise.

Asset Planning Strategies can help you to evaluate your current 401(k) investment, coach you on rolling over a former employer’s 401(k), and suggest strategies which seek to avoid taxes and penalties associated with underperforming 401(k) funds.

As each individual’s tax situation is different, take time to consider all the facts and consult with your tax advisor before initiating a rollover. Distributions received before age 59 1/2 are subject to an early distribution penalty of 10% additional tax unless an exception applies. This information is not intended to be a substitute for specific individualized tax, legal or estate planning advice.