Thinking About a 401(k) Rollover?
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Once you retire or leave an employer, you are eligible to roll your existing employer-sponsored 401(k) plan into an IRA. An IRA allows for flexibility regarding investment options, withdrawal rules & fees, compared to a 401(k). Contact a Hummel Financial advisor to have your questions answered about 401(k) rollovers.
We know the process of converting your 401(k) plan to an IRA can be confusing (in addition to retirement income planning in general). We field questions every day about timing, limits, taxes, rules & more. If you have a specific question about your 401(k), don't hesitate to contact us for a free consultation now. Also, you can download our 401(k) Rollover Checklist PDF for more information.
While cashing out your 401(k) and taking the money for yourself is an option, one should consider the effects. Typically, if one withdraws from their 401(k) before they are 59 1/2 years of age, they would be subject to a 10% penalty in addition to income tax. However, it is possible to withdraw from your savings during or after the calendar year in which you turn 55 in some situations. You cannot be a current employee of the company who controls the 401(k), and you must have left that employer during or after the year in which you turned 55. This is commonly referred to as the Rule of 55.
Keep in current 401(k)
You can keep your money in your current 401(k) plan as long as you would like, with a few exceptions. If the balance is below $5,000, the employer is legally not obligated to let you keep your funds in their 401(k) plan. Also, if your employer was matching your 401(k) contributions, you get to keep all of thier contributed funds only if the contributions had fully vested before you left your job. If not, your employer would get to take back any of their unvested contributions.
Roll to new 401(k)
If you are starting a new job and have a new employer 401(k), you may choose to move your money to the new 401(K). Advantages of moving to your new 401(k) include the following:
- Some 401(k) plans allow loans that give you the option to borrow (in some plans) up to 50% of your rollover amount.
- There is generally greater creditor protection in employer retirement plans vs an IRA. With some exceptions, creditors cannot count your plan funds against you when they seek to satisfy any debts and obligations regardless if you have declared bankruptcy. Generally, there is protection under federal law for rollover IRAs only if you have declared bankruptcy.
- You are generally not required to take Requirement Minimum Distribution (RMDs) if you work past the age of 72 and still participate in the employer plan.
- There is a five year holding period before you can begin to receive your tax-free qualified distributions from a Roth account. If you have already completed that period in your old plan, rolling to a new Roth 401(k) plan, your holding period will carry over. Conversely, if you roll to a Roth IRA, your five-year holding period starts over.
Roll over to an IRA
There are many benefits to rolling your 401(k) over to an IRA. It's always best to review all your options with a Financial Advisor to determine which option is best for you. Let's review some of the reasons you should consider rolling over your 401(k) to an IRA:
- There are many investment options available in an IRA. You can freely move your money around to different investments offered by the IRA trustee and you can select as many investments as you want and divide the balance how you see fit.
- You can allocate your funds among different IRA custodians and for added diversification, you can even select multiple institutions. There is no limit to the number of transfers per year. This gives you the option to switch if you are not pleased with investment performance or customer service.
- You have the option to roll your 401(k) plan to a Roth IRA. You pay taxes on the rollover amount but future qualified distributions will be tax free. This can be acomplished by rolling the Traditional 401(k) money into a Traditional IRA plan, and then complete a Roth conversion, which converts the Traditional Roth into a Roth IRA.
- You may have more distribution flexibility. Employer plans depend on the terms of that specific plan but with IRAs the timing and amount are up to you (until you reach 72 and are required to take RMDs for a traditional IRA). The distributions are subject to taxes but you still can access the funds as you need them.
Fees & Expenses
Simply click the button below, enter your email address and we will send our rollover process checklist for your reference.
Since 1957, Hummel has been building its business on its uncompromising values of integrity, trust & hard work.
When it comes to retirement planning, this means that your Hummel Financial Advisor knows how important this decision is and we are here to help you choose the best option.
We're in the business of trust-building, not selling products.
Hummel Group is a Trusted Choice Independent Agency.
To learn more about what this means for you, take a look at the Trusted Choice Pledge of Performance by clicking the Trusted Choice logo.
Trusted Choice is a Directory of Independent Insurance Agents and Brokers, and is not affiliated with The O.N. Equity Sales Company or O.N. Investment Management Company.
Whether you are ready for retirement or recently switched jobs, we want to help you carefully consider all available investment options for your situtation. Because a 401(k) is only one part of your retirement planning process, let the Financial Advisors at Hummel Group help you develop a comprehensive plan that meets your needs while considering things like:
We can work with anyone in any state, but we are based in Ohio and have office locations in the following cities:
If you live outside of that area and would still like to work with us, no problem. Virtual meet-ups work just as well!