Nest eggs are fragile, and often become even more vulnerable in transit. So how do you handle a retirement account if you’re changing jobs? Forefront Advisory CEO, Brad Reifler says a rollover to an IRA account is largely inexpensive, that is, if you don’t need the money soon.
Once the money from your 401k is moved into a rollover account, it’s protected from taxes, and it’s an easy approach to merge any retirement funds from different employers into one place. Reifler says IRA rollovers are also a safe haven from workplace plans that are often bloated with fees. You can establish an IRA at just about any financial institution. It’s really a safe haven. Investors can roll their nest eggs into a safe IRA and assemble a bevy of low cost investment options.
Avoiding Rollover Pitfalls
First, the Internal Revenue Service is a real stickler when it comes to penalties, so if you’re moving money to an IRA account from your 401k, don’t bother requesting a check from your employer. You have a limited time from the receipt of a check to the time you deposit the funds, and if you go over that time limit, you’ll be penalized. Opt for a direct rollover and your employer will transfer the funds to an established IRA. Since the check is made directly to your IRA institution, the Internal Revenue will know the money was a direct transfer. This way a tax withholding problem never arises. At the end of the year, you’ll receive a 1099R from your former employer detailing the distribution.
Of course you could just leave your 401k in your former company’s retirement plan but the downside are the usual plan limitations. Company-sponsored retirement plans primarily have limited investment choices which inhibit your ability to diversify. Leaving your money in place also costs you some flexibility. Once you’re no longer an employee, you can no longer make contributions to that plan, and some plans limit your ability to make changes to your investments.
According to Brad Reifler, your decision will ultimately impact your retirement years, therefore, before choosing, look at your options side-by-side and compare the effects of each.
The Tenacious Strategist
After working in finance for more than three decades, CrunchBase shows that Brad Reifler surpassed a stellar banking career to rapidly rise to stardom. First Reifler Trading Company then on to Pali Capital, and now Forefront Capital, LLC has an ambitious foothold in the finance industry. Reifler’s career has spanned diverse roles, and he has since shown himself to be a tenacious strategist and leader. Follow Brad on Twitter if you’d like to learn even more about him.