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It’s Time to Consider a Rollover

A 401(k) rollover could be a strategic financial move with several potential benefits. One key advantage is increased control over your retirement savings. Rolling over your 401(k) allows you to transition funds into an Individual Retirement Account (IRA) or another employer-sponsored plan, giving you a broader range of investment options and potentially lower fees.

If you’ve recently changed jobs, a rollover can also help consolidate multiple retirement accounts, simplify financial management, and provide a clearer picture of your overall retirement strategy. Timing is crucial – as current market conditions or changes in your financial situation may influence the decision. By acting promptly, you can position yourself to take advantage of potential market opportunities or better align your investment strategy with your retirement goals.

Consult a Fort Worth or Dallas fiduciary advisor at Trajan Wealth for personalized insights tailored to your circumstances.

When to Cash Out Your 401(k)

Cashing out your 401(k) should generally be a last resort. Withdrawing funds from your 401(k) before the age of 59.5 may result in early withdrawal penalties of 10% or more – in addition to income taxes.

If you earn $70,000 annually and withdraw $100,000 from your company retirement plan, you must report $170,000 to the IRS that year, severely impacting your tax bill. For this reason, it’s typically prudent to explore possibilities with a financial advisor first to understand the implications of cashing out your 401(k).

You might consider cashing out for financial emergencies, medical expenses, or purchasing a primary residence. Our Dallas fiduciary advisors can help you carefully evaluate the long-term impact on your retirement savings and explore alternatives that align with your financial goals – such as taking a loan from your 401(k) instead.

401(k) Rollovers in Dallas & Fort Worth:
FAQs

 

Timing can vary depending on the financial institutions involved, the type(s) of accounts, and the complexity of the rollover process. A straightforward 401(k) rollover typically takes 2-4 weeks.

Common reasons for rollover delays include incomplete paperwork, plan restrictions, outstanding loans, employer approval, marketing conditions, verification processes, or administrative processing time.

Employers can also freeze your 401(k) due to pending litigations, mergers, or administrative changes. Legally, they’ll need to provide a 30-day notice prior so you can make necessary arrangements. However, during this time, you won’t be able to contribute or withdraw any funds from your account.

If the institutions involved don’t communicate or coordinate, you may run into miscommunications and delays. Fiduciary advisors like Trajan Wealth can help streamline the process by coordinating efforts.

There’s also the issue of a vesting schedule. If you’re at 0% vested status, you’ll only be entitled to the funds you’ve added. Once fully vested, your 401(k), including interest or company additions, is yours. It’s essential to understand your vesting schedule (if there is one) to know when employer contributions belong to you.

A 401(k) plan is not required to accept rollover contributions. Your new employer may also limit what types they take, including 401(k) plans, 403(b) plans, 457 plans, or IRAs.

401(k) tax implications are dependent on what type(s) you use. Here are four common 401(k) rollover types:

Direct rollovers. Transfer funds from your old plan directly into your new employer’s 401(k) plan without incurring taxes or penalties.

Indirect rollovers. Receive a check with funds from your previous employer’s plan. This type requires prompt action. If you’re younger than 59.5 and don’t deposit the check within 60 days, you’ll receive a 10% early withdrawal penalty on top of any taxes you’ll be paying. Your ex-employer will also be required to withhold 20% for taxes. To deposit your total balance into an IRA, you must use additional funds to account for the withheld 20%.

Traditional 401(k) to Traditional IRA. In this instance, you’re deferring taxes and won’t owe anything.

Traditional 401(k) to Roth IRA. This time requires income taxes on the amount you roll over. Depending on how low future tax rates dip, you can use this to save money over time.

Work With Trajan Wealth for 401(k) Rollovers in Dallas & Fort Worth

Whether you need to consolidate retirement accounts, diversify investments, or enhance financial flexibility, Dallas and Fort Worth residents can leverage the knowledge of Trajan Wealth to navigate the intricacies of 401(k) rollovers for a secure retirement.

Visit one of our Dallas area offices in McKinney, Frisco, Southlake, Arlington, or Fort Worth, Texas locations.
We aim to make the financial management process streamlined and convenient for our clients, every step of the way..

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