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 either 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 be a strong 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. Doing so can make your retirement planning more manageable and easy 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 you should also consider that by leaving your money with your former employer, your investment choices will be 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 there?
    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 if I want to make more contributions to my Rollover IRA?
  2. Can I roll over after-tax funds to a qualified retirement plan?
  3. Can I roll funds from more than one company plan into the same IRA?
  4. What are my retirement needs, and how do I plan to use my savings and investments?
  5. How do you know what financial institution and investment products are best for you?
  6. When it comes to your retirement savings, is guaranteed income or liquidity more important?
  7. Would you prefer to have your assets spread across different institutions or consolidated in one?
  8. I inherited an IRA. Can I roll this into my a qualified retirement plan?
  9. Can I roll over my required minimum distributions?

When considering rolling over the proceeds of your retirement plan to another qualified option such as an IRA, please note that you have the option of leaving the funds in your existing plan or transferring them into a new employer’s plan. You should consult with the human resources department of the applicable employer to learn about the options available to you under your plan and any applicable fees and expenses. Tax consequences may apply to transferring stock out of your retirement plan.

Please consult with a tax advisor before taking such an option. You should also know that, depending on the state where you reside, assets held in a retirement plan may enjoy greater protection from creditors than in other types of tax-qualified vehicles. You should also consider the different fees and different services that apply to your plan and compare them to any new option you are considering.

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

While some do choose to execute their retirement rollovers on their own, you should consider working with a qualified financial professional. Their expertise could help you answer these questions and make the choices that are best for you.

A New York Life agent would be happy to have a free, no-obligation meeting with you to discuss your 401(k) rollover needs. Click here to find an agent near you.

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