If you recently left or are planning to leave your current job and have an employer sponsored plan such as a 401(k), I highly recommend getting in contact with your local Central Investment Advisor so they can both help you with the process along with pursuing your financial goals.
By Josh Terrell
Assistant Vice President
LPL Financial Advisor
Leaving a job can be very stressful. Whether you’re leaving for retirement or simply looking for a new job, there are bound to be challenges and adjustments along the way. One of the most common questions I get as a financial advisor for clients who are leaving their job is “what should I do with my 401(k)?” While some people will just rollover their 401(k) into another one if they are starting a new job, this is not the only option. The four options are to: leave the money in their former employer’s plan, if permitted, roll over the assets to their new employer’s plan, if one is available and rollovers are permitted, cash out the account value, or roll over into an IRA. While there are many positives to a 401(k) being rolled over into an IRA, the following are arguably the most important.
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Flexibility of Funds
401(k) ‘s may be limited when it comes to what an investor can put their funds into. Often there is a limited amount of funds that an investor can choose for their allocation. By rolling into an IRA, an investor can allocate their funds however they want, including stocks, bonds, annuities, etc. -
No Tax Implications
Most 401(k)’s are either Traditional funds, Roth funds, or a mixture of both. No matter how your allocation is, by rolling it into an IRA it is not considered a taxable distribution. This means on traditional funds you can continue to get tax deferred growth within the account until a taxable distribution is taken. -
Access to Your Own Personal Financial Advisor
When you roll your 401(k) to Central Investment Advisors, you will be working with your own personal financial advisor who will help create a financial plan that is best suited for you. We believe having this resource to help guide you through the endless investments out there is an important benefit of rolling over these funds.
If you recently left or are planning to leave your current job and have an employer sponsored plan such as a 401(k), I highly recommend getting in contact with your local Central Investment Advisor so they can both help you with the process along with pursuing your financial goals.
Category: Investing
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.
Fixed and Variable annuities are suitable for long-term investing, such as retirement investing. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply. Variable annuities are subject to market risk and may lose value.
Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax. There are several distribution choices plan participants have regarding their company retirement plan and/or pension. Since each choice has its own implications, it is recommended that you discuss and compare all potential fees, expenses, commissions, taxes, and legal ramifications with your financial advisor and tax/legal counsel prior to making a rollover decision.
