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401(k) Rollover Advisor in Houston, TX

Houston Retirement Income Planners

At Houston Retirement Income Planners, we specialize in all things retirement income-related. Our goal is to assist clients in achieving their ideal standard of living at retirement. With over thirty years of experience in the financial services industry, we have the expert knowledge to help you find missing pieces to your retirement income portfolio that can take yours to the next level. We are an independent firm, so we have zero obligation to sell any specific products or services. We only offer our clients solutions that we believe are in their best interest with the highest level of integrity and unbiased advice.

401(k) Rollover

A 401(k) rollover is the transfer of funds from a 401(k) employer-sponsored plan to an individual retirement account (IRA) or a new 401(k) plan. The IRS gives 60 days from the date that the funds are removed from the original 401(k) plan for the funds to be put into a new retirement savings vehicle; otherwise, the owner incurs fees and/or penalties from the IRS. If you leave a job where you have an employer-sponsored 401(k), you must decide what to do with the money in the account. There are many options available, including completing a 401(k) rollover into your new employer’s plan, a bank rollover option, or a rollover into an individual retirement account (IRA). One of the most beneficial options in many cases is the IRA rollover.

IRA Rollover

There are many benefits to completing a 401(k) rollover to an IRA. These include having more diverse investment selections than the standard 401(k) plan and potentially lower account fees. A 401(k) rollover to IRA can be broken down into four essential steps, choose the type of IRA account to open, open the new IRA, ask for a direct 401(k) rollover to IRA or follow the IRS 60 day rule, and select your investments. A financial advisor is a valuable resource to help you decide where to allocate retirement savings funds and deciding which account would be most beneficial for your individual needs. A Roth IRA rollover is taxed upon completion. A traditional IRA rollover is tax-deferred. Except if you complete a Roth 401(k) rollover to a Roth IRA, additional taxes will not be assessed on those Roth funds.

A Traditional 401k rollover to a Traditional IRA

  1. Incurs no tax consequences if done correctly.
  2. Continues to grow tax deferred.
  3. Is subject to income taxes when the money is withdrawn in retirement or before.
  4. Traditional IRAs are additionally subjected to the RMD (required minimum withdrawal) annual required IRS schedule each year whether you want to withdraw money from your IRA or not.

Rolling 401k money in a Roth IRA bucket into an individual Roth IRA

  1. Incurs no tax consequences.
  2. Continues to grow tax deferred, no grows TAX FREE.
  3. When money is withdrawn in retirement, your money comes out subject to ZERO federal income taxes.
  4. Your money is NOT subjected to the RMD, so you are in much more control of your retirement money and therefore can withdraw it only based on your individual needs each year or not withdraw at all. This is a great feature of the Roth IRA, to be in complete control of your money in retirement.

401(k) Rollover Rules

It can be challenging to sort through the many 401(k) rollover rules. They are based on your individual situation. The kind of 401(k) you had initially and which type of account you are going to roll it into can make a difference in whether or not you must pay taxes, fees, penalties, or other consequences. All of which is why it is so important to get a financial advisor to assist you with your 401(k) rollover. A financial advisor knows the ins and outs of all 401(k) rollover rules and will help you avoid any unexpected tax obligations. Some things that you’ll need to keep in mind:

  • Traditional 401(k)s are funded with pre-tax income. You will owe taxes on these funds upon qualified withdrawal.
  • A Roth IRA is funded with after-tax dollars, so you must pay taxes upfront. Qualified withdrawals from a Roth IRA are then tax-free.
  • Immediate tax implications can be avoided by dispersing post-tax funds to a Roth IRA and pre-tax funds to a traditional IRA.
  • Each year, the IRS reviews the maximum contribution limits for 401(k) plans and other retirement savings accounts. Sometimes they decide to change these limits.
  • Individuals aged 50 or over may make “catch-up” contributions above the regular annual contribution limits.

Key Takeaways

At Houston Retirement Income Planners, we help you each and every step of the way to ensure that your 401(k) rollover happens as smoothly as possible, and you ultimately win out with the most beneficial option for your individual scenario. Houston Retirement Income Planners in Houston, TX, can help you with a 401(k) rollover to an IRA or other IRA rollover options. Call us to learn more!

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