Dalton Wealth Management ...
What Should You Do With Your Old 401(k)?
A Rollover IRA Has Its Advantages.
David M. Dalton, JD, MBA, CFP®
Financial Consultant and LPL Registered Principal
If you have changed jobs several times during the course of your career, you may have a collection of retirement savings accounts from your previous employers. It may be beneficial to consolidate your retirement savings by rolling your old 401(k) or similar employer-sponsored retirement plans into an IRA.
A Rollover IRA offers you some major benefits:
- Increased Investment Options. The biggest advantage of rolling over your old 401(k) into an IRA is the wider universe of investment choices, a benefit that's more valuable to you if the choices in your old 401(k) plan are limited or performing poorly (Who is advising you on how well your 401(k) doing?). Most employer-sponsored retirement savings plans only offer a small choice of mutual funds and/or company stock.
- Easier Record Keeping and Account Maintenance. Receiving 401(k) statements from various employers makes it difficult to monitor what you own and ensure each investment is playing the role you intended in your portfolio. Consolidating your retirement accounts into a Rollover IRA enables you to review and rebalance your portfolio.
- Flexible Estate Planning. IRAs also offer more freedom in the estate planning department. If you want to name multiple beneficiaries or a charitable organization as your beneficiary that is best done with an IRA. Many employer-sponsored plans do not accommodate sophisticated beneficiary designations.
When you take a distribution from a 401(k) plan that you intend to roll over, you must deposit it into an IRA or other tax-deferred retirement plan within 60 days. If you do not roll over the funds within 60 days, the distribution is taxable. Also, in most cases, a 10% penalty for early withdrawal applies if you are younger than 55 ½ years of age. To keep it simple and avoid careless mistakes, you can process a direct roll over, also referred to as a trustee-to-trustee rollover.
Would you like help determining whether a 401(k) rollover is right for you? We have the knowledge and experience to assist you with making the right decisions. Call the Dalton Wealth Management team at 513-785-3512 to schedule your no-obligation appointment today.
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