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401(k) Plan Retirement Choices


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Tracking Down Missing Money

On average, a person, 18 to 54, will have 12 jobs in their lifetime. Is it possible you have money in an account you didn't know about? Perhaps months or even years have gone by, or you’ve moved to the other side of the country. Compounding interest is a good thing on 401(k) programs, but not manging your assests can cost you in the long run. Speak with our specialist today for options available for you and your goals.

 

Because your 401(k) may be a sustanial part of your retirement savings, it is important to weigh the pros and cons of your options. Below are 4 choices for your to consider. 

Keep your Old 401(k) with former Employer

 

Most companies—but not all—allow you to keep your retirement savings in their plans after you leave.

Some benefits:

  • Your money has the chance to continue to grow tax-deferred.
  • Keeps current investment choices.
  • You can take penalty-free withdrawals if you leave your job at age 55 or older.
  • Keeps ownership of company stock in the account where it may have certain tax benefits at withdrawals.
  • Many offer institutionally priced (i.e., lower-cost) or unique investment options.
  • Protected from bankruptcy and creditors.

But:

  • If you have less than $5,000 in the plan, the money may be automatically sent to you (or sent to an IRA for you).
  • If you choose to keep the money in your former employer's plan, you won't be able to add any more money to the account, or, in most cases, take a 401(k) loan.
  • Withdrawal options may be limited. For instance, you may not be able to take a partial withdrawal; you may have to take the entire balance.
  • After you reach age 72, you'll have to take annual required minimum distributions (RMDs) from a traditional 401(k).

If you hold appreciated company stock in your workplace savings account, consider the potential impact of net unrealized appreciation (NUA) before choosing between a rollover or an alternative.

Roll over the money into an IRA

A Rollover IRA is a retirement account that allows you to move money from your former employer-sponsored retirement plan into an IRA.

You can open the IRA with a bank or brokerage firm. Make sure to research fees and expenses when choosing an IRA provider, though, as they can really vary.

Some benefits:

  • Your money has the chance to continue to grow tax-deferred.
  • Continue to make contributions and save for retirement.
  • May have the services of a financial professional to help with investing and retirement planning.
  • Combine other qualified plans or IRA savings into one account.
  • If you're under age 59½, you can withdraw money penalty-free for a qualifying first-time home purchase or higher education expenses.
  • You may be able to get a broader range of investment choices than is available in an employer's plan.

But:

  • After you reach age 72, you’ll have to take annual required minimum distributions (RMDs) from a traditional IRA (but not a Roth IRA) every year, even if you're still working.
  • Investment expenses and ccount fees may be higher than those of employer plans.
  • Loans not allowed. Can only access money by taking a taxable distribution.
  • Limited protection from creditors.

Roll Over Your 401(k) to Your New Employer's Plan

Not all employers will accept a rollover from a previous employer's plan, so check with your new employer before making any decisions.

 

Some Benefits:

  • Maintains tax-deferred status of savings
  • Having only one 401(k) can make it easier to manage your retirement savings.
  • Many plans offer lower-cost or plan-specific investment options.
  • Loan provisions may allow bollowing from the rolled over money

But:

  • Make sure you understand the new plan rules.
  • investment choices limited to those the plan offers.
  • May be more restrictive on withdrawals while employed.
  • Roll-ins may not be allowed or an eligibility period may need to be satisfied.

 

Check your new employer's summary plan description (SPD) to confirm details and requirements.

Cash Out

TAKING MONEY OUT OF YOUR RETIREMENT ACCOUNTS SHOULD BE AVOIDED UNLESS YOU HAVE NO OTHER OPTIONS!

The consequesnces depend on your age and tax situation. 

Some Benefit:

  • Immediate access to cash

But:

  • 20% withheld for federal income taxes
  • 10% early distribution penalty
  • May move you to a higher tax bracket
  • Forfeits future tax-deferred growth potential
  • Not protected fro creditors or bankruptcy

 

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*Securities offered through OneAmerica Securities, Inc., a Registered Investment Advisor, Member FINRA/SIPC.
American Heritage Financial, LLC is not an affiliate of OneAmerica Securities or the companies of OneAmerica and is not a broker dealer or Registered Investment Advisor. American Heritage Financial, LLC is authorized to conduct life insurance and securities business in Florida and may be licensed in other states. American Heritage Financial, LLC cannot conduct life insurance or securities business in states in which we are not licensed. This website is in no way to be construed as an offer for the sale of insurance or securities products in unauthorized states or countries.
Provided content is for overview and informational purposes only and is not intended and should not be relied upon as individualized tax, legal, fiduciary, or investment advice. Neither OneAmerica Securities, the companies of OneAmerica, American Heritage Financial, LLC, nor their representatives provide tax or legal advice. For answers to specific questions and before making any decisions, please consult a qualified attorney or tax advisor. Guarantees are subject to the claims paying ability of the issuing insurance company. American Heritage Financial, LLC is not affiliated with or endorsed by the Social Security Administration, the Centers for Medicare & Medicaid Services or any other governmental agency. All numeric examples and any individuals shown are hypothetical and were used for explanatory purposes only. Actual results may vary.
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