Questions and answers about reinvesting your 401(k).

Why now may be a good time to consider a rollover

Over the next several years, millions of Americans will change jobs or retire. Many of them have money they have saved through their 401(k) or 403(b) accounts.

If you’re one of them, now may be a good time to consider a rollover. When you leave your job or retire, you have a decision to make regarding your 401(k) money. While leaving those assets in the former employer’s plan is an option, a rollover should also be a consideration.

Ultimately, rolling over your 401(k) money offers you three key benefits—choice, control, and convenience.

Choice: You can choose from many different financial vehicles. Among them are traditional and Roth IRAs, and a host of other investments. You should choose an investment that best fits your needs and preferences.

Control: By rolling over your qualified assets, your new account will be independent of your former employer’s program rules and restrictions. This will give you more control over how and where you invest your money.

Convenience: Rollovers offer an excellent opportunity to begin consolidating the various retirement assets you may have accumulated over time. Rolling over assets can make your retirement planning more manageable and easier to track.

However, rolling over your retirement assets involves a lot more than paperwork! There are a number of key questions you should ask yourself in the process.

  1. Do I really need to roll over my 401(k) now that I am retiring/no longer working?
    You don’t have to roll over your 401(k), but when you leave your money with your former employer, your investment choices are limited to what’s available in the plan. There also may be limitations on withdrawals and when and how you invest.
  2. Can I use a 401(k) rollover to move funds out of my employer-sponsored plan while I still work for the employer?
    Most employer-sponsored retirement plans do not allow you to roll funds out of the plan while you are still employed. However, a few do allow for an “in-service distribution,” which allows you to roll over funds while you are still employed. It is best to consult your plan’s administrator.
  3. Will taxes be withheld when I move funds from my 401(k) into another qualified retirement plan?
    You can avoid mandatory tax withholding by requesting a direct rollover, with the check made payable directly to your new trustee. As long as there is no distribution payable to you, the transfer is tax free.
  4. Can I use a 401(k) rollover to move just part of my account?
    Yes, you can use a rollover to move a portion of your funds from a qualified plan or an IRA to another IRA.
  5. Do I have to report 401(k) rollover transactions on my tax return?
    IRA rollovers are reported on your tax return as a non-taxable transaction. However, you should mention any IRA rollover to your tax preparer or double-check all documentation if you prepare your taxes yourself.

Here are a few other questions that you might want to ask yourself or a financial advisor:

  1. What are my retirement needs, and how do I plan to use my savings and investments?
  2. How do I know what financial institution and investment products are best for ME?
  3. What is more important to me when it comes to your retirement savings, guaranteed income or liquidity?
  4. Would I prefer to have my assets spread across different institutions or consolidated in one?

Before rolling over the proceeds of your retirement plan to an Individual Retirement Account (IRA) or annuity, consider whether you would benefit from other possible options, such as leaving the funds in your current plan or transferring them into a new employer’s plan.

Consult with each employer’s Human Resources Department to learn about important plan features and rules. Be sure to compare the fees and expenses of each plan and investment option with those of any other investments that you are considering. Review plan documents and the IRA agreement, as well as the prospectuses for plan investment options and any other investments that you are considering. Your registered representative can help explain any new product being offered.

Neither New York Life nor its representatives or affiliates provide tax or legal advice. Consult with a tax or legal advisor to discuss any questions or concerns that you have, such as the tax consequences of withdrawing funds or removing shares of an employer’s stock from a retirement plan and whether money invested in a retirement plan receives greater protection from creditors and legal judgments in your state than money invested in an IRA or annuity. Also consider that you may be able to take taxable, but penalty-free, withdrawals from an employer-sponsored retirement plan between the ages of 55 and 59½ that you would not be able to take if you invested in an IRA or annuity. Additionally, if you plan to work after you reach age 70½, you may not be required to take minimum distributions from your current employer’s retirement plan but would be required to do so for funds invested in an IRA or annuity.

Beginning January 1, 2015, an IRA participant is allowed only one indirect rollover from one IRA to another in any 12-month period across all IRAs that he or she owns. An indirect rollover is a participant-initiated distribution in which the participant receives the proceeds and subsequently rolls those proceeds into another (or the same) IRA within 60 days. Individuals can continue to make unlimited trustee-to-trustee transfers (transfers directly between IRAs) as well as unlimited conversions from traditional IRAs to Roth IRAs. Clients should consult their tax advisors prior to effecting rollovers.

New York Life offers several 401(k) rollover options and has a long history of providing financial security to its policy owners.

While some people execute their retirement rollovers on their own, you should consider working with a qualified financial professional. Their expertise could help you make the choices that are best for you.

A NYLIFE Securities registered representative would be happy to have a free, no-obligation meeting with you to discuss your 401(k) rollover needs. Click here to find a representative near you.

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