When you retire or leave your job, one of the decisions you have to make is what to do with your 401(k) assets. There are several options available to you, and it’s wise to consult an experienced financial consultant to determine which option is best for your current needs and long-term financial goals. Fees are always an important factor in this decision. At James T. Borello & Co., our consultants have many years of experience dealing with retirement accounts and helping clients with their retirement planning needs.
One of the most popular options for handling a 401(k) is to rollover assets into an IRA account. With this option, your 401(k) funds are transferred as a lump sum to either a Roth IRA account or a traditional IRA account. Which type of IRA account is right for you depends on your circumstances and your income level eligibility. With a Roth IRA, you will have to pay income taxes on the transferred amount at the time of the rollover. However, you will not have to pay further taxes on growth or withdrawals.
If you rollover your 401(k) to a traditional IRA, you will only have to pay taxes at the time of withdrawal provided you meet certain requirements. Those requirements include:
- Depositing 100% of your rollover funds into the IRA
- Depositing 401(k) funds into your IRA within 60 days of receiving them or choosing a direct rollover.
If these requirements are not met, you will have to pay income taxes on the funds you receive. If you are less than 59½ years of age, you will have to pay an additional 10% penalty for early withdrawal.
Contact us to learn more about your 401(k) options and how a rollover IRA might work in your financial plan.