Part 4: Common reasons why one would consider rolling over assets from a former employer

Good morning Women Supporting Women!

Happy Monday to you all.  I hope you had a blessed week.  As always, I had a great week.  I had the opportunity to deliver a workshop to one of the schools in my East New York area, in Brooklyn and watched my son pass his road test!  Not to mention I lost my wallet almost 3 weeks ago.  Some wonderful soul mailed it to me!!!!  I felt in my heart that someone would return it and they did!  I am beyond ecstatic and grateful.

Now, onto our topic of the day.  Last week, I shared with you the limits for the various IRAs.  This week I will discuss some common reasons why one would think about rolling over their 401K plan from a previous employer.

Reasons:

  1. No more contributions allowed– When you no longer work for a company, your contributions cease.  If you were looking to grow your money by additional contributions, it won’t happen with a former employer
  2.  Limited investment option – If your funds are left with a former employer, you are limited to the investment options the company has and no others.
  3.  Not bound to the IRA limits – When you rollover a 401K plan into a like, qualified plan (e.g. Tax deferred 401K plan to a Tax deferred Traditional IRA, you don’t have to worry about going over the limits we discussed the previous week.  You can move the whole balance over without worrying about penalties for overfunding the plan.
  4.  May require a waiting period – Some employers require new employees to wait a year before they can contribute/rollover a 401K plan –  This means 1 year will go by where you are not able to contribute into a plan.
  5.  Most employer-sponsored retirement plans cannot be aggregated for RMD calculations–  As we’ve spoken about before, when a person turns 70 1/2, they are required by law to take out Required Minimum Distributions aka RMDs.  When a person has a 401K plan AND IRAs, the IRS will do two separate calculations for the withdrawals.  When a 401K plan is rolled over into an IRA and if you have other IRAs, the balances can be added together for calculation purposes.  Also the total can be withdrawn from one IRA as opposed to all of them.  It makes paperwork easier and simplified.

Before you make any moves, talk to the HR representative from your former employer and your new employer to hear your options.  Ask about fees and how leaving it with the former employer or moving it into a new employer can benefit you.

Next Up:  Part 5 –  How will an IRA impact your retirement in the future?

As always, if you have any additional questions, please feel free to post here or to email me at:  thefinancialcomforter@gmail.com

Thank you for reading and have a blessed week,

Marsha

Changing the lives in our community….one family at a time

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.