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One of the most used tools on our tool belt when helping clients is a 401(k) Rollover. This is a way to move an account without incurring penalties or taxes. (Note, this is NOT a withdrawal, which WOULD subject you to a 10% penalty and income tax for the entire amount in the year of that withdrawal).


It’s not uncommon in today’s world for employees to switch jobs more regularly as they continue to look for the next potential career move. And maybe leaving your current job isn’t because of a career move, but maybe your current company just got bought out, or perhaps you’re retiring soon. Whatever the reason for leaving your job, it leaves your old hard-earned 401(k) (or other work-sponsored retirement plans) sitting like a forgotten toy in the attic.


In this article, we will walk through what it means to roll an old account over, how that happens, and what that allows you to do in the future.


What is a Rollover?

A rollover allows someone to take the money they have saved and earned at their old job and move it to their own separately held account when they leave that job. This includes everything your employer put in on your behalf, too, as long as you are vested!  It is a perfect example of having your cake and eating it, too.


Alternatively, if you get a new job right away and they have a 401(k) you are eligible to participate in, that is also an option. You would most likely only do this if the plan has tremendously diverse investments with a great history and performance. Additionally, you could be a high earner making more than the Roth IRA limits. If this is the case, you would want to roll it into your new 401(k) because if you have a Rollover IRA, you cannot make a backdoor Roth contribution.


How does it Work?

The process is simple if you decide to roll it over to a separately held account. We suggest meeting with your financial advisor to have them help explain the process and see if it makes the most sense for you to do this. If you don’t have a financial advisor, we have a team of advisors with the heart of a teacher willing to answer your questions regarding the process and scenario.


If it makes sense to move the account, we can open it for you at our custodian at Charles Schwab. Once the account number is processed the next day, we (your advisor and you) would make a 3-way-call to the custodian of your old 401(k), provide them the new account number, and then they (the old custodian) will send a check to you, or straight to our office, depending on the custodian. You will see what typically happens with this later in the article.


What a Rollover Can Do for You

Besides taking no penalty and having no tax consequences, rolling your money into a separately held IRA can do many things for you. For example, if you invest that money with an advisor like us, we can invest it on Schwab’s platform. This means no trading fees, low-cost investments, and no proprietary products. We have an unlimited scope and range of investments you previously would not have had at your employer.


Additionally, rolling over an old 401(k) can give you constant and unlimited access to an advisor like us to help with more than just investments. The Whitaker-Myers Group can help with taxes, estate planning, retirement projections, and planning, as well as insurance. These are generally perks you wouldn’t have if you left the 401(k) at your previous employer.


If you want these perks now, you can set a meeting to discuss contributing to a Roth IRA or funding a brokerage account, or if you are 59 ½, you can roll over your employer plan even if you are still employed there. That is called an in-service rollover; you can do that while still keeping your 401(k) open and contributing to it. We would be happy to discuss if this would be a viable option for you.


In conclusion, rolling over an old retirement account can feel like a daunting and time-consuming task, but it isn’t with the help of an advisor who has the heart of a teacher. Reach out to an advisor on our team to help you navigate this big step and find the best option for you.

Old 401k rollovers - What to do with them

April 22, 2024

Drew Hodgson

Whitaker-Myers Wealth Managers is an SEC-registered investment adviser firm.  The information presented is for educational purposes only and intended for a broad audience.  The information does not intend to make an offer or solicitation to sell or purchase any specific securities, investments, or investment strategies. Investments involve risk and are not guaranteed.  Whitaker-Myers Wealth Managers reasonably believes that this marketing does not include any false or misleading statements or omissions of facts regarding services, investment, or client experience. Whitaker-Myers Wealth Managers has a reasonable belief that the content will not cause an untrue or misleading implication regarding the adviser’s services, investments, or client experiences. Please refer to the firm’s ADV Part 2A for material risks disclosures.

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