Roll Over 401k Options: FAQ #1 with Coach Kimmy

A frequently asked question is what to do with your 401(k) plan if you switch employers.   

 

Before making any decision, be sure to review the information provided for some guidance.   As you can see most questions have multiple answers and in order to make the best decision for you and your family it is important to be well informed of all the options as well as the ramifications of each course of action.

Option one:

It is much easier and more efficient to have a direct transfer of your retirement into a TRADITIONAL IRA. This is called a 401k rollover.   It is recommended to use a FINRA/SPIC member and Independent Registered Representatives.  They have access to literally thousands of funds versus a Wirehouse.  The independent registered Rep still goes through a Broker/Dealer and your funds get transferred directly from your employer’s 401k plan to the independent Broker/Dealer sponsor plan not the Agent. A Wirehouse isn’t as recommended because their funds choices are more restricted to “their own investment products.” A few examples of Wire houses are: an Edward Jones, JP Morgan Chase, Or a Wells Fargo, Bank of America, Ameriprise or Thrivent.  All these Investment firms have excellent reputations and longevity, however, with the new Department of Labor Laws and the focus on Fiduciary to the client there is some conflict as many wire houses focus is to invest in their own company’s products and funds.   By opting for this option, and because of the direct roller over, your money remains tax deferred.  Many funds also allow continuation of monthly contribution to the new fund.  Some restrictions do apply so check with a Registered Rep how to go about the transfer.  Your money should always follow you the reason is further explained in option two.

 

Option two:

You may continue leaving the funds in your original employer’s plan if you have more than $5,000 vested in the plan, because it if is less, the employer may not allow you to keep your money in the plan.  If are able to leave the money in, your employer may require you to withdraw it upon reaching the plan’s designated age of retirement.  This option may be very risky and not recommended no matter how big or small your 401k is. If this company went out of business, there is a very strong possibility your personal and company match could be lost.  If they company goes out of business there could be complicated and erroneous instructions mailed to you about a very short timeframe to option for 1-time withdrawal which most of the time they very well could take a large percentage usually up to 20% – 25% mediatory surrender charge, custodian exiting fees, transaction fees to get your money out.  This is a way of penalizing you with hopes you will keep your money in the new custodian’s fund.  This could lead to your money sitting in a target fund with no Management and locked in until their required retirement age.  This is leaving your money and how it is invested up to the custodian, not YOU.  Furthermore, this is still a risk that if the new custodian goes out of business your retirement may not be protected by SPIC. The last thing you want to happen is to have a company go out of business with your money tied up in their plan. There are countless stories of this.  Remember ENRON?

 

Option three:

You can also choose to have an indirect transfer by having your previous employer give you the money to redeposit, but this has to be done in a timely manner.  If you forget, and it takes longer than 60 days, then it becomes a taxable distribution. This IS NOT usually recommended because you may be tempted to take a much-deserved vacation, buy a new vehicle or make unwise decisions that can affect your long term retirement plan.  As stated there will be penalties and taxes and it’s just not worth the risk.

 

Before making any decisions on what to do with your old company 401k, I would be very happy to offer a no cost, no obligation meeting. Contact Kim Holland-Lyon, Independent Registered Rep, FINRA Member. As most questions have multiple answers and in order to make the best decision for you and your family it is important to be well informed of all the options as well as the ramifications of each.  In order to schedule an appointment with Kim, you can call her at (561) 302-51531 or fill out your information to schedule your consultation.

 

Before making any decisions on what to do with your old company 401k, I would be very happy to offer a no cost, no obligation consultation. Please contact Kim Holland-Lyon, Independent Investment Advisor. As most questions have multiple answers and in order to make the best decision for you and your family it is important to be well informed of all the options as well as the ramifications of each.  In order to schedule an appointment with Kim, you can call her at (561) 302-51531 or fill out your information in the contact form to schedule your consultation.

 

If you have questions about your roll over 401k, or if you have questions or are looking for a Financial Planner, I’d love to talk with you. My name is Kim Holland-Lyon, I have studied and worked in the financial planning industry for many years educating individuals through numerous programs to enhance their financial intelligence and practices. I am a SmartVestor investing pro. I hold several securities licenses and other certifications and designations to include Life, Health, Annuity, Long-Term Care, Identity Theft, Estate Planning and Real Estate. All of this knowledge enables me to offer comprehensive financial planning for my clients to help them prepare for financial independence and management of their investment portfolios. Whether you have long term financial goals or short term financial goals, please contact me directly at 561-302-5153 or coachkimmyelp@gmail.com.