Are you preparing to, or have you recently left your job where you had a 401(k)? Once you leave your job, you’re generally entitled to do what you wish with those funds. Unfortunately, many people take unnecessary losses and penalties by making the wrong decision. Knowing your 401(k) distribution options, and how they will affect your retirement savings, can make the difference between having a retirement and not having one at all. Almost always, the best option would be to rollover your 401(k) into an IRA.
The 401(k) rollover is ideal because it allows you to transfer your existing retirement account that you have through your employer into another individual retirement account (IRA) without being subject to unnecessary taxes or withdrawal penalties. Remember, retirement savings like a 401(k) are funded with pre-tax dollars, and grow tax-deferred. That means if you take a premature distribution, the IRS is going to stick you with taxes on all of that money, and also apply an additional 10% penalty if you withdraw the money prior to age 59 1/2.
Once you’ve made the wise choice by deciding to rollover your 401(k) into an IRA, you just need to learn how to get started. It may seem intimidating at first, but there are just some basic 401(k) rollover rules to follow and working with a LPL financial advisor or wealth manager will make it a breeze. First, you will want to make sure you are officially terminated with your employer so that there are no snags and the funds can be released. Second, if you do not have one already, you will want to open an IRA with someone you feel comfortable with so that when you fill out the distribution forms you have the new accounts information. Third, obtain the rollover forms, or call in your rollover request. Most companies require you to complete a distribution or rollover form, but some allow you to call in and fill it out over the phone with a representative. Either way, if this troublesome to you, a trustworthy LPL financial advisor can walk you through this. Finally, just follow-up on everything and make sure the appropriate funds have been sent, that they are in the new account, and invest away!
At Clay Northam Wealth Management we realize that retirement is the biggest financial goal and specialize in 401(k) rollovers to ensure that our clients’ retirement stays on track. Servicing all of Southern California, we have two convenient offices located in the Los Angeles and Orange County. Please to not hesitate to contact our offices to see how we can be of value to you.