Don't Roll Over Your 401K If..

The nice thing about a 401(k) is that you can always choose to roll it over into an individual retirement account (IRA) if you change jobs or are just looking for a positive change in terms of investment options and reduced fees. However, it’s important to understand that, while the “rollover” can often be wise, there are some scenarios in which you should never choose it. For best results, don’t choose a rollover if...  

You’re 55-59

If you haven’t yet reached the age of 59.5, and you make the choice to do a rollover, you’ll be faced with an unwanted 10% penalty. The only exception is if, after age 55,  you lose your job or choose to leave it. That “exception” though is pretty protective of your best interests because when a job change comes into play, penalty-free withdrawals are allowed. After a rollover, though, you don’t have this protection...not until you’re 59.5. Since there are no guarantees in life, you’re better off playing it safe and avoiding the rollover and its lessened protection until you’re above the age where it matters.

There’s Company Stock at Stake

If you’ve got a decent amount of company stock in your 401(k) plan, you don’t want to risk losing your tax exemptions with a rollover. You’ll lose out on a potential capital gains tax rate, which can save you a real bundle. Taking that risk just isn’t worth it!

You’re Not Thinking Straight

Changing jobs, especially when it wasn’t your choice to do so, can be an emotional experience. Many people get into this “out with the old, in with the new” mindset when it comes to their old 401(k), and though it can be tempting to think that way, it’s usually not wise. You need to take time to think about whether your old plan or the IRA is the best fit for you, your needs, and your goals, so until you’ve cooled down and talked things over with a financial advisor, don’t make any big decisions that you might regret later.

In fact, erring on the side of caution is often your best bet in all 401(k) and general financial matters. #401KRollover

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New Rules for IRA Rollovers

The times, they are a’changing, and so are the rules for IRAs. In the past, the general rule was that you could use your IRA as needed without penalty, with one catch. That “catch” was that you had to return the money within two months or sixty days. Providing you did that, your earnings remained tax-deferred, and you didn't have to pay any taxes. Furthermore, you could do that with any IRA you owned. So, potentially, if you had four IRAs, you could get four tax-free and penalty-free rollovers per year.

In a move that has United States citizens up in arms, however, the United States Tax Court recently ruled that only one penalty-free IRA rollover is now allowed per year. So, now, even if you have those four IRAs, you can still only get one rollover per year without paying the price.  

This new rule isn’t in effect yet. Once 2015 rolls around, though, the new rule will be in place. As a result, many citizens are “stocking up” and getting in as many rollovers as they can. That’s probably not the smartest move though. There’s no reason to take money out “just because” if you don’t actually need it.

For now, you’ll just have to learn with the new rules. Budgeting your money better so that you have enough savings to cover those emergency expenses and thus don’t have to rely on your IRA as a safety net is one step toward keeping this new rule from negatively impacting you.

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New Law Affects IRA Rollovers

People used to believe that taxpayers could roll over as many IRAs as they wanted, providing that they waited one year before rolling over the same account again. A new law put in place by the United States Tax Court, however, puts the kibosh on that theory. Now, the law clarifies, taxpayers can only engage in one tax

free IRA rollover per year. So, even if a taxpayer has eight IRAs, he can only roll over one within a one year period.

While may professionals working in the tax and financial industries argue that the new IRA rollover law will only affect very wealthy individuals and not the “average citizen,” it’s still worthwhile to understand how this law will affect you, especially if you have or were planning on opening multiple IRAs.

If you’d like more information on the new IRA law or if you’d just like to learn more about IRAs in general, contact the friendly experts at Platinum Financial Associates of Naperville.

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Planning for Your IRA Rollover

If you’ve recently decided to execute an IRA rollover, or if you’ve just been thinking about doing so, you should know that these rollovers, while they can be beneficial, are actually quite complex and should not be enacted without the help of an experienced financial professional.

One decision you’ll have to make with an IRA rollover, for example, is how you wish to transfer your funds. You may want to write a check, or you may want to have your account custodian write a check to you; there are benefits and drawbacks to either option, as well as wise reasons for choosing either option, and knowing which choice is the right one for you is a whole lot easier with the help of a financial professional.

That decision is just one of many you’ll have to make in the rollover process, and you don’t want to make these types of important choices blindly! Seek help and advice from a financial expert at Platinum Financial Associates.

Work Smart

In today’s economy, you’re considered fortunate if you have a job, any job. The truth is, however, that, ideally, you don’ t just need “any job.” You need a job that comes with benefits, savings options, and retirement plans. If you have that job, then great! And, if not, then you might want to start looking for something better.

See, when you have a job that keeps the future in mind for its employees, you have a better chance of opening an IRA, and when you have an IRA, you stand a chance for a beneficial IRA rollover. This isn’t to say, of course, that you can’t open an IRA without having the ideal job, but having a good, forward-looking job certainly helps matters.

Good job or not, it’s up to you to plan for your future and to do that in diverse ways. In fact, the more ways you can invest—and an IRA rollover plan is a smart way to do so—the better. If you’re ready to start or change up an IRA, whether it’s through your employer or not, contact Platinum Financial Services of Naperville.

What You Need to Know About IRA Rollovers

Whether you’re considering an IRA rollover or are just curious about what IRA rollovers are all about, there are a few basic things to know. First of all, of course, you have to fully understand what an IRA rollover is; “IRA rollover” is a term used to describe a transferring of funds from a savings or retirement account into an IRA. Money can be transferred to a traditional IRA or a Roth IRA and usually involves a direct transfer or the use of a check written by the custodian of the account to the account holder.  There are pros and cons to either option.

With the check option, you can expect to have a 20% withholding penalty assessed before the check is written; there are some ways around this penalty, however, and a professional financial advisor can usually help you to avoid it. Also keep in mind that, in most cases, you can only rollover funds once per year, though again, financial experts can often help you to find ways around the rules.

Because the rollover process is complex and because there are lots of little tricks that can help you, it’s wise to seek professional help before engaging in IRA rollovers. For help with your rollover or with any money-related matter, call on the financial gurus at Platinum Financial Associates of Naperville.

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Technology Stocks are the Way to Go

Are you thinking about taking advantage of your IRA rollover and moving some of your investments? If so, you need to do some thinking about which investments are smart ones. Right now, for example, technology-related investments are a much safer bet than financial institution investments. Apple, Google, and Microsoft, for example, are all performing better than Wells Fargo, JP Morgan, CitiGroup, and Bank of America at the moment.

Of course, not all technology-related investments are smart ones. As you plan for that IRA rollover, consider the fact that Amazon and Facebook are currently not doing as well as the banking institutions listed above.

Obviously, making smart choices about your investments involves some knowledge about the current state of the stock world. Unless you’re an investment whiz yourself, it’s a good idea to get some professional advice before you make any major moves. In Naperville, you can get the advice you need by choosing Platinum Financial Associates.

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