Taking Control of Your Retirement With a Rollover IRA
If you’ve got an old 401(k) collecting dust or have recently retired or changed jobs, you may want to consider rolling those retirement account assets into an IRA. While you may like the funds available in your 401(k), those accounts do have some limitations that should factor into your decision-making with that money you’ve worked so hard to accrue.
In this special report, available exclusively from Adviser Investments, you’ll find out the benefits and drawbacks of doing a rollover, including:
- The three choices you have with 401(k) assets
- Tax considerations surrounding a rollover
- When it might be time to hire a professional adviser
It’s never too soon to become a more informed investor. Please complete the form on this page to receive this free, no-obligation special report today!
For more information, please call us at (800) 492-6868.
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The Rollover Advantage
Congratulations! You’re retiring or have landed a new job. And that company-sponsored account you’ve been regularly adding to over the years has grown large enough that it’s become one of your primary retirement assets. You can now make one simple move that will benefit you for the rest of your life.
Because you are moving on, you are no longer limited to the investment choices offered by your last employer. And even if you like the funds available in your 401(k) or 403(b) retirement account, you may also want to consider other options. With something called a rollover IRA, you have the freedom to choose among a much wider range of investments.
Why Rolling Over Can Be a Good Choice
A 401(k) or 403(b) is a very good investment while you’re working, but it has some important limitations. These accounts typically restrict you to the handful of investments, usually mutual funds, offered in your plan, and perhaps some company stock. Maybe those options are good enough for now, but will they work for the rest of your life? Are you thinking of hiring an adviser to manage your retirement savings?
By moving your employer-sponsored account into a rollover IRA, you create more investment options and opportunities for yourself—you literally have thousands of mutual funds to choose among. And if you prefer the peace of mind that comes with getting professional help, you can now hire any adviser you’d like, something most 401(k) plans don’t accommodate.
Is a Rollover the Right Move?
One to two years before you retire, you should consider what to do with your 401(k) assets. You have three choices:
- The Do-Nothing Approach: You leave the money with your former employer’s plan and self-manage with the options that employer provides.
- The Taxable-Event Approach: You cash out and pay a big tax bill.
- The Rollover-Advantage Approach: You roll your retirement account into an IRA and continue to invest tax-deferred in a portfolio of your choosing.
For many people, we’ve found that the rollover is their best move. Unfortunately, not every company offers especially impressive retirement plans to their employees. And on top of that, many plans do not allow advisers to directly manage or make trades in participant accounts. This leaves retirees who seek professional management with little choice other than to roll their assets into an IRA.
Now, let’s walk through the options and explain when a rollover may be in your best interests.
The Do-Nothing Approach
If you have at least $5,000 invested in your 401(k), you can typically leave the account untouched when you switch jobs or hang it up for good. If your old employer offers a well diversified plan of exceptional mutual funds at reasonable costs (and you are comfortable managing your investments on your own), doing nothing may make sense. 401(k) plans also offer heightened protections from creditors, and if you are between 55 and 59½ years old, you may be able take advantage of penalty-free withdrawals. Depending on your needs, these features may be reason enough to stay put.
That said, many investors—especially those seeking ongoing guidance from an adviser—will benefit by moving their assets into a rollover IRA. The pluses include the flexibility to have an adviser manage your account directly, thousands of investment options to choose among and potentially lower-cost investments than were offered in your company plan.
But if you do wish to leave your assets in your employer’s plan, Adviser Investments’ wealth management team often reviews our clients’ 401(k), 403(b) or 457 portfolios at their request. We make recommendations based on the available options and each clients’ goals and risk comfort level—then they make any necessary changes themselves.
The Taxable-Event Approach
You can always cash out of your 401(k) when you retire or change jobs and simply take your money in a lump sum. For most investors, that leads to unnecessary problems.
First, when you make your withdrawal, you will pay income tax on the entire value of the distribution— all withdrawals from a 401(k) are subject to taxation. Remember, this was money that was never taxed in the past, but simply went into your retirement account “pretax.” Now Uncle Sam wants his share of your savings and a piece of any gains you’ve made since investing it.
Second, if you’re under 59½ years old when you take money from your retirement account, your distribution, whether you take it all out or just a portion of it, is subject to an additional 10% penalty for making what amounts to an early withdrawal.
As if that’s not enough of a sting, it’s also possible that if you take your retirement assets in a lump sum (or fail to reinvest the full amount and must pay taxes on your early withdrawal), the additional “income” on your tax return could push you into a higher tax bracket, making the cost of not doing a rollover even more painful.
The Rollover-Advantage Approach
If you think a rollover may be your best option, we’re here to help. Our wealth management professionals are well-versed in every step you need to take. We don’t just tell you how to manage the process—we walk you through it every step of the way.
A rollover can offer you maximum flexibility to invest in the best funds for your goals and needs. It provides a broad universe of stocks, ETFs, funds and, more importantly, mutual fund managers to invest in. And finding those managers is where Adviser Investments comes in.
Professional Rollover Advice
Your 401(k) account is probably your biggest retirement asset. And as you’ve seen, 401(k) plans and IRAs each have their pros and cons. If you decide to seek professional help, find an adviser who will work in your best interests. (For guidance on how to do this, click here for a free copy of our exclusive report, The 15 Questions You Need to Ask Your Financial Adviser.)
Adviser Investments has nearly 25 years of experience as a fee-only independent wealth manager. It’s all we’ve ever been. Helping people like you build and protect their retirement assets to minimize the risk of not being able to live the retirement lifestyle you expect—or worse yet, outliving your money—is what we do!
If you want to find out more about a rollover, one of our experienced wealth managers will be happy to conduct a thorough one-on-one consultation to determine your investment goals and tolerance for risk. If a rollover makes sense for your situation, we’ll guide you through the process and work with you to build your new portfolio. Not only will we be able to choose from a broader selection of mutual funds, but we can also help you invest in an individual bond or equity portfolio if that is what best serves your retirement needs.
For more information, please contact Adviser Investments at 800-492-6868 or email@example.com.
This material is distributed for informational purposes only. The investment ideas and expressions of opinion may contain certain forward-looking statements and should not be viewed as recommendations or personal investment advice, or considered an offer to buy or sell specific securities. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed.
Our statements and opinions are subject to change without notice and should be considered only as part of a diversified portfolio. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged.
Past performance is not an indication of future returns. The tax information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. We do not provide legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.
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