401k to IRA Rollover Pros and Cons
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- เผยแพร่เมื่อ 30 มิ.ย. 2024
- Explanation of the pros and cons of rolling over a 401(k) to an IRA.
Links in this video:
Retirement Planning Insights - www.tenonfinancial.com/newsle...
Taxes in Retirement - / taxesinretirement
#IRARollover #401kRollover #Rollover
DISCLAIMER: This video is only helpful hints and education. It is not specific tax, legal or investment advice. Before considering acting on anything you see in this video, first consult with your tax, legal or investment advisor. While the information expressed in this video is believed to be accurate, neither Andy Panko, CFP®, RICP®, EA nor Tenon Financial LLC make any guarantees to its accuracy.
Excellent video! Thanks!
Glad you liked it!
Thank you. Very helpful.
My pleasure, I'm glad it was helpful!
Great video! Earned a sub. 👍🏻
Thank you!
Planning retirement has never been this confusing! First SVB, then Signature bank and now First republic, these are all the signs of yet another 2008 market crash and recession 2.0, so my question is do I still save in the United States dollar, or could this be a good time to buy stocks? So I’m left wondering what 2023 has in store for us investors, I’ve been sitting on over $745K equity from a home sale and I’m not sure where to go from here,
Everyone needs a different stream of income , unfortunately having a job doesn't mean security due to the high rate of tax , one needs to move ahead their expectation, I would recommend refraining from investing in stocks for now. Instead, it would be prudent to consider retaining a portion of your assets in gold. Alternatively, seeking advice from a financial advisor could provide valuable guidance in this matter.
@@McElvinn true, A lot of folks downplay the role of advisors until being burnt by their own emotions. I remember couple summers back, after my lengthy divorce, I needed a good boost to help my business stay afloat, hence I researched for license advisors and came across someone of due diligence, helped a lot to grow my reserve notwithstanding inflation, from $275k to approx. $850k so far.
@@corrySledd Do you mind sharing info on the adviser who assisted you? been saving for pension since age 18 - company scheme. along the way I hit higher tax, so I added to my company pension with a SIPP (tax benefits) I'm 46 now and would love to grow my finance more aggressively, there are a few cars I still wish to drive, a few mega holidays, etc.
@@AUstinnesc My advisor is NICOLE DESIREE SIMON , a renowned figure in her line of work. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market
@@corrySledd she actually appears to be well-read and educated. I just did a Google search for her name and found her webpage, I appreciate you sharing
Thank you so much for the information.
Thank you.
thank you!!
Thank you for posting this helpful video
When retired there is an advantage. Withdrawal from 401-k has 20% withholding and with IRS slow refunds, it may be 18 months...by rolling over to an IRA and then withdrawal, no mandatory 20% withholding.
While your 401(k) account will likely continue to grow after you stop contributing to it, that growth will be limited by the market, your plan’s balance and other factors, so i can perceive the preference for IRA, I still want to know how best to compound at least $2m in retirement savings.
A solid strategy can be a key component of an investor’s retirement portfolio. That way your investment is balanced and you don’t get to make so much losses.
my partner’s been considering going the same route, could you share more info please on the advisor that guides you
Thank you for this tip , I must say, Monica appears to be quite knowledgeable. After coming across her web page, I went through her resume and I must say, it was quite impressive. I reached out and scheduled a call
Fantastic info. Several financial advisors have told me I have to take equal payments for five years. 🙃
Under 72t “Substantially Equal Periodic Payments” you have to take equal payments for at least five years
@RetirementPlanningEducation but this doesn't apply to the rule of 55. I've already called Fidelity who holds my 401k.
Excellent video.
Thanks!
Thanks for going into some of the more subtle pros and cons.
Thank you for a simple straight forward explanation. I’m in the process of rolling over from 401k to IRA
I'm glad you found it helpful, thank you!
Subscribed.
Thanks. This info is always good to consider. I'm in NY State. What law or rule allowed me to take my money from my 401k at 55yo? My 401k says i would have a penalty prior to 59.5yo. ?
It's an IRS rule that overrides the default treatment mentioned by your 401(k). Check out the "Separation from Service" row at the bottom of the table here: www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions#:~:text=Generally%2C%20the%20amounts%20an%20individual,tax%20unless%20an%20exception%20applies.
Husband is retiring next March he will be 64.5 his company will not let his 401k stay with them. It is a modest 401k of 165k. We know nothing about investing dose a IRA come with a advisor and do they charge a monthly fee to care for our account? We live in Texas with the 401k, social security and a modest pension...This will be our livelihood. We have lost money before in the 90’s and investing scares us to death. Thank you for any advice. Alice
The bass in the intro music lol
It's not as good as the bass scene out of Miami in the 90's, but it's close!
Thank you, Andy, for another great video!
thanks!
I want to rollover a 401k for a job I no longer have. Complexity is I want to change the provider. The 401K holder now is cagey about how to get the money out!
They can’t prevent you from taking your money out if you’ve since left. They may try to make it difficult, but they can’t stop you. If they keep trying to block you, tell them you’ll inform the Department of Labor about it
each wants a paper form sent to them and then somehow i'll get notified . sounds antiquated or avoidant.
Why is paying a financial advisor a concern? The bigger concern is whether or not the financial advisor is worth the fees?
The concern is when the advisor isn’t worth the fee. There are sadly advisors who don’t do much else besides reinvest a client’s account into more complicated and expensive versions of what the client already had in their 401(k). That’s when rollovers are bad because the only one who really benefits is the advisor
I have 401k in the company I’m working for. I’m near 65 and plan to retire soon. Some people said if after retired and still leave money in that 401k then I won’t be able to withdraw some money out when needed unless move it to IRA. Is it right?
It all depends on your employer's plan and how they chose to allow distributions. Some plans allow you to only make one single distribution after you leave. That basically means you have to take the entire thing out in one shot; other as a rollover to an IRA or as a normal distribution. Other plans allow multiple distributions, but perhaps limit it to only a few per year. Other plans are a lot more flexible and allow even more frequent withdrawals. You'll have to ask your 401(k) administrator and see what the rules are for your particular plan
There's another con - if you are doing annual backdoor Roth conversions, you are going to wind up with a big tax liability if you roll the pre-tax 401(k) funds into your IRA account.
I recently left a company after 18yrs for another company. Im undecided if i should rollover my 401k into an ira or just leave it. I cannot rollover into my current company plan. Any advice?
Great question, but there are too many potential things to consider in making that decision. It may be worth reaching out to a fee-only hourly financial planner. Your best bet to find one of those would be to search on www.GarrettPlanningNetwork.com
Hi. Have been following and love the content. Don’t see the pro rata rule as a con, for back door roth contributions. Am I missing something?
Yeah, that's a great point. I struggled with including that and decided not to. In hindsight, I probably should have. Yes, you're right; for those who are doing backdoor Roth IRA contributions, keeping pre-tax money in your 401(k) and out of your IRA could definitely make sense.
I left it out because it was fairly technical and I thought it wouldn't apply to most people. So I didn't want to risk making it too confusing. But if/when I redo that video, I'll include it. Thanks!
A lot more talking about 401 K so much !!! On youtube.I would like some information about 403 B PLEASE !!!!
I’m 59 1/2, recently laid off, I have 75,000 vested in a 401k. What do I do now?
If you have stocks in a 401K, can they be directly transferred into an IRA or will they be sold and the money moved?
Check with the 401k and see what they allow.
I saw a women on TikTok who makes videos on it's IRA rollovers and such. She said that ira rollover do not have contribution limits like a Roth IRA has a 6k limit or 7k for 50nand older, is this true?
Correct, there is no limit on how much you can rollover from one qualified plan to another. Whereas contributions DO have annual limits.
There are similarly no limits on how much you can rollover from one Roth qualified plan (like a Roth 401(k)) to another Roth qualified plan (like a Roth IRA).
Returning back to previous job after being let go due to COVID. Upon return, I was asked if I would like to roll over my 401k to an IRA. Not retiring for 10 years min. Not a savy investor, just saved really well (200k). Roll it or keep it. TIA
Probably best to roll the IRA to a company like Schwab, unless your company offers excellent low-cost mutual fund investment options.
Thank you for the video and the time it takes to make them!
Husband has an annuity they offered him a lump sum of 60k or lifetime( his family lives in their 100’s) payment of $303 a month. Is taking the $303. Monthly the best plan?
There are a lot of things to consider and there isn't necessarily going to be a definitively right answer unfortunately. Here's a summary of the main things to think about when deciding between taking the lump sum or monthly income: th-cam.com/video/Yz6aTCEA8_0/w-d-xo.html
I would take the 60k and invest it in a basket of stocks that will give you an average dividend yield of 6 percent. That will provide $300 per month while your sitting on 60k vs getting $303 per month and sitting on Zero. Yes there would be risk but well worth it.
@@davidleonard4925 Rather than individual stocks, I suggest a low-cost stock mutual fund.
Does the timing matter? The market is currently down and i have been losing money. I wonder if i should wait till the market goes up?
The timing of rolling over the 401(k) to an IRA? No, it doesn't really matter.
If your 401(k) and IRA are at the same custodian, they may possibly be able to transfer over your investments as-is, in which case you don't have to sell anything in your 401(k) to roll it to the IRA. In which case there is zero timing element involved.
But more likely, in order to roll your 401(k) to an IRA, your 401(k) will have to liquidate everything in your 401(k) to cash, and then that cash will be distributed out via paper check to be deposited into your IRA. The timing involved there is that while the money is sitting in cash, it is not invested. That could end up being good or bad. It's good if the market goes during the time and you miss those down days by not being invested. It's bad if the market goes up those few days and you miss out on not being invested during the time. But it's honestly a crap shoot what the market will do over those few days, so don't let it stop you. Just be aware that you'll be uninvested while the rollover is happening.
@@RetirementPlanningEducation wow thank you so much for the detailed explanation. Really appreciate it!
What and how is a financial advusor cost or jet in fees
It all depends on the advisor, how he or she is regulated, what products or services he or she sells and how he or she chooses to structure fees.
If the advisor just focuses on managing investments, chances are they will charge a percentage of the assets they oversee, and that percentage is typically about 1% per year.
If the advisor is ultimately just an insurance salesperson, there is typically no outright fee to the client, because the person gets paid a commission on the product(s) he or she sells to you.
If the advisor is just an advice-giver and doesn't manage investments or sell commissioned products, the fee could be hourly (typically $200-$400/hr) or a fixed ongoing annual fee of a typically anywhere up to about $10k or so per year.
I’m planning to retire at full retirement age 66 1/2. Would like to take my 401k out to put as down payment on a house. How with this affect my taxes if I move to a no income tax state (CA to TX)? I understand that if I roll it over an IRA, I have to wait 5 years before I can take money out, is this correct?
I assume the 401(k) is all pre-tax money? Assuming so, you can roll it to an IRA and then wouldn't be any waiting period to then take money out of it. Since you're over 59 1/2, there won't be the 10% penalty on withdrawals. But all withdrawals will be taxed or ordinary income federally. And depending what state you're living in when you make the withdrawals, there could be state income tax, too (CA, yes. TX, no).
So, taking a large amount of money out of a tax-deferred account like a 401(k) or IRA to make a downpayment on a house isn't ideal, because you will have to pay a lot of tax on it. For example, taking $300k out in one year will lead to a lot more tax than taking $50k out per year for six years.
But, if that's your only source of assets and you need to to take money from somewhere and don't have any other options, perhaps that's your only choice, even though the taxability of that withdrawal could be quite high.
And furthermore, the spike in income from taking a large distribution could very well jack up your Medicare premiums for a year, in two years.
@@RetirementPlanningEducation thank you for your reply. So is the same whether I take it or roll it over, I still have to pay taxes.
@@SCSC-qz7rr correct. Tax is owed on distributions regardless.
@@SCSC-qz7rrOnly if you take the $ out. No tax on the rollover to non-Roth IRA. Putting all that $ into a house is probably not financially prudent.
I'm planning rollover my 401k to Roth IRA. What about the RMDs??
Roth IRAs don’t have RMDs (unless it’s an inherited Roth IRA, in which case it might)
Thanks for sharing this! I'm going to roll over my 401K to IRA as the company I work for doesn't offer 401 and I would like lower account fees.
Will I owe tax when I rollover a 401k to IRA? I am not anywhere near retirement age (28).
No, but be sure to do it as a “direct” rollover
www.irs.gov/retirement-plans/plan-participant-employee/rollovers-of-retirement-plan-and-ira-distributions
This was very helpful. Thank you. I also heard that if you have company stock in your 401k and have made significant unrealized capital gains in it that there is a caveat that allows you to tax the company stocks at ordinary income for the cost of the stock and capital gains on realized gain once taken.
Right on...it's called Net Unrealized Appreciation: th-cam.com/video/88ClUv1a660/w-d-xo.html
Very good point, main reason I left my 401k with my employer
@@RetirementPlanningEducation does this apply to any stocks in the 401k or just the employer's stock?
@@campbecd Just the employer's
Cool, so i can I transfer half the 401k to ira?
Depends what your employer allows. Employers can customize their restrictions around your ability to take withdrawals. Some employers may only allow you to roll out the entire thing in one shot...they may not allow partial distributions. You'd have to check with your plan administrator and see what they say
Not sure about other states, but Maryland allows preferential tax treatment on 401k distributions in some circumstances. This does not apply to IRA distributions.
Interesting, thanks! State taxes always have their own unique twists and differences in treatment compared to federal taxes
@@RetirementPlanningEducation It is due to a 401k being an employer sponsored defined contribution pension plan vs. an IRA. An employer sponsored defined benefit
pension plan would also have the preferential tax treatment.
wow, I didn't know what the penalty amount was.
Definitely don't want to give away money unnecessarily
you mean for not taking the RMD?
I just retired today! My 401K is managed by Fidelity, and has performed well historically. I am going to turn 54 next month, and do not see a need to touch my retirement funds for the next 10 years. Would you recommend leaving the investment in the 401K or transferring it to a ROTH IRA?
Doh! I am thinking it would have been wise to consult with a professional at least six months before retirement. Imagine how nice it would have been to have pulled off a mega backdoor Roth IRA rollover.
If you leave it in a 401k they have to deduct 20% withholding to the IRS- even if you only only need to withhold 12%. You get it back a year later but you still need to give the government an interest free loan in doing so.....
No, you’re totally wrong. No tax if left in the plan. And no tax if rolled into a non-Roth IRA.
If you have an outstanding loan against your 401k, can I still rollover to an IRA?
Check with the administrator of your particular 401(k) plan. But it's not likely. Or at least, you'd have to either pay back the loan before rolling it over, or they'd only let you roll over the amount that's not the loan.
IRAs are not allowed to have loans against them, so there is definitely no way you can rollover a loan to an IRA. But check to see if your plan will let you rollover anything at all if you have a loan outstanding; they may first require full repayment of the loan before they'll allow ANY amount of money to be rolled out to an IRA.
My wife left her job over 10 years ago and has $40$ sitting in a 401k from that old employer. Just to be clear, I should be able to roll that over to an IRA, correct? There is very limited investment opportunities in the 401k. Thanks for the video!
Yes, she should be able to roll that into her IRA.
@@RetirementPlanningEducation if his wife is unemployed and between the ages of 55 & 59.5, can she take some money out tax free & put it into Roth? What is a backdoor Roth IRA?
Yes, roll over
@@mhara3676No. Likely taxed if rolled/converted to Roth.
@@susisteiner7769 Unfortunately, you’re confusing different options. A back-door Roth is not related to a 401k rollover.
Excellent video with clear and important information. Thanks!
thank you very much!
Great information Just the protection alone tells me to leave in current 401K Thanks
Only if the 401k plan offers excellent low-cost mutual fund options.
I have a 401K from an old employer (no longer work there) with only $3,077.89. How can I rollover this amount without any penalties or problems?
Contact the administrator of that old 401(k) and tell them you’d like to roll your balance over. They will walk you through the next steps.
You’ll first have to have somewhere to receive the rollover: either an IRA or your current employer’s retirement plan (if you’re still working and they offer a retirement plan that allows you to roll in outside money). Have that account info in hand when doing the rollover from your old 401(k)
I retired this year at 55 and would like to rollover my 403B to an IRA. Will Roth conversions from the new IRA be penalty free if I pay the taxes from my taxable account?
Conversions thankfully aren't subject to the 10% penalty, regardless what age you are. But yes, any pre-tax money you convert will be taxable in the year of the conversion
I have a Mutual of America 401k and 403b. I left the company years ago. Do I need to consolidate the mutual funds into one before trustee transfer? I can do both in one year since it won't be a rollover...NO??
Thanx for any help
Check with Mutual of America, but I wouldn't think you need to consolidate the 401(k) and 403(b) before rolling either or both out to outside qualified accounts (such as an IRA). If you do "direct" rollovers from both plans, yes, you can do them in the same year. A direct rollover is where the cash proceeds of the 401(k) and/or 403(b) is made payable to your IRA custodian for the benefit of you. It is NOT made payable to you directly...that would be an "indirect" rollover. If you do an indirect rollover, that's where you can only do one every 12 months.
Good day. I was wondering if there's a one-year rule pertaining to the 401(k) to IRA rollover. I have an old 401(k) account, and I wanted to split its distribution - half money will go to company 1 IRA and half will go to company 2 IRA. They sent me two check so I can deposit them into those accounts. I understand that I have to deposit them within 60 days. But regarding the "one 60-day indirect rollover per year" rule, do I have to pay tax and penalty fees in this case?
Were the checks made payable to you, or payable to the new custodians fbo your IRAs? If the latter, those are still direct rollovers and aren't limited to one per 12 months
@@RetirementPlanningEducation Thank you. This is the first time I did this, and I thought I had to pay huge penalty fees for splitting the money into two different IRA accounts. The checks were made to the new company FBO my IRA.
Straight up good info. Thanks.
Becoming a millionaire through a Roth IRA or a 401(k) involves different strategies for maximizing profits. A Roth IRA offers tax-free withdrawals in retirement, which can be advantageous if you expect to be in a higher tax bracket later in life. On the other hand, a 401(k) provides tax-deferred growth and potential employer contributions, boosting your savings. The optimal choice depends on factors like your current and future tax situation, employer match, and investment options. Consulting a financial advisor can help tailor a strategy that aligns with your financial goals and circumstances.
Prioritizing effective personal finance management holds greater significance than the sheer amount saved, irrespective of income source. Consulting a certified financial advisor can offer tailored strategies to optimize financial results by reducing expenses and enhancing income, regardless of whether it's earned through employment or investments.
I wholeheartedly concur. At 60 years old and newly retired, my external retirement funds total around One million two hundred fifty thousand dollars.. With no debt and minimal retirement fund allocation relative to my portfolio's value over the last three years, I recognize the importance of a financial advisor. Neglecting them isn't an option; however, thorough research is vital to find a trustworthy fiduciary advisor.
This aligns perfectly with my desire to organize my finances prior to retirement. Could you provide me with access to your advisor?
The decision on when to pick an Adviser is a very personal one. I take guidance from ‘Natalie Lynn Fisk‘ to meet my growth goals and avoid mistakes, she's well-qualified and her page can be easily found on the net.
Thank you for the lead. I searched her up, and I have sent her an email. I hope she gets back to me soon.
Fact is, though the 401k, IRA, name it are one of the safest retirement plans, they are not particularly good options. Better strategy; Live below your means, Invest 20-30% of your income into the stock market but of course, be well informed about where you want to put your money... I made my first million earlier this year from stocks alone with about 550k after I dissolved my 401k and added little cash (through the help of a pro though). Greatest decision I ever made.
Now you have my attention sir How did you do this? Who's the knight in shinning armour? I am slowly giving up on all of these
@@the_jean_mum Low Blow right there ma'am. You didn't have to pull the gender card. Wasnt necessary. Thanks still. Ill check her out
@@the_jean_mum Wow I know this little lady. Once attended a seminar she was also in attendance here in Texas,, Great speaker. I still think the 401k or putting it in a high yield savings account is the more reasonable option, given the economy,,
@@archiemcdougald5466 This right here is the second time I am coming across this name in a week. Came across her podcast and it was lit
I’m 59 1/2 and my employer does not allow me to take monthly distributions and work part time. If I quit my job and roll over my 401k to an IRA and start getting monthly withdraws and go back to work with my former employer are there any consequences? Thank you
I find that the creditor protection is often overlooked. Although it may be a rare occurrence, losing your total IRA to a lawsuit would be devastating. Keeping your 401K may be cheap insurance against such a loss.
I have both a Trad 401(k) and a Roth 401(k) at a company I will leave AFTER turning age 55. Can I specify which account any withdrawals come from under the Rule of 55? Can I rollover my Roth 401(k) assets (opened 5+ years ago) into my Roth IRA that I opened and funded over 10 years ago and leave my Trad 401(K) with the previous employer? (the options are good enough I just want to control the Roth assets in one basket so I can "sip" off them and control my marginal tax rate).
Sip? Best to leave the Roth alone as long as possible.
Great video. Inmy case, it looks like there are more pros than cons to doing a rollover.
Interesting. For me, only one of the pros (potentially) pertains to me and none of the cons. But it's still important to explore the subject. Thanks for this video.
50 / 50 hmmmm.
I mean none of these videos even CONSIDER the fact that retires want INCOME from their 401k money! NONE!
Roll over, keep it - whatever - but none talk about how a retiree is expected to LIVE, pay bills! NONE!
Annuities were mentioned at about 1:30 in the video. And it said they’re good for safe and stable income
If I'm 80 ,I'm spending it. Lol
I am 58 & was layed off. If I withdraw funds tax free from 401K, can I put them in a Roth IRA without paying taxes? Is there an annual limit? I am in Cal. Great video - thx!
Q1 No
Q2 No