One of the best ways to save for retirement and to plan for your future is to invest in a 401(k) – a way of saving for retirement that is tax-deferred. Because 401(k)s are employer-sponsored, over the years, things with your job may change, raising questions about 401(k) funding and options. If you are leaving your job for a new employer, consult your financial advisor for a full understanding of each of your distribution options before acting.
As explained by Bankrate.com, a 401(k) rollover refers to a direct transfer of the money in your retirement account to a new plan or IRA. As opposed to rolling over to a new workplace plan, you may be permitted to stay within your current workplace plan (although you won’t be allowed to continue making contributions), or you can cash out.
If you decide to cash out your 401(k), you’ll face some tax consequences. To be sure, you may face a withdrawal penalty depending on your age, and you’ll also be subject to both state and federal taxes. Of course, cashing out also means that you’re losing out on tax-deferred growth.
If you decide to roll over a 401(k), you won’t owe any taxes on the rollover transaction itself. The IRS permits one rollover per 12-month period and allows a 60-day window of time to roll over a retirement plan distribution into another plan.
Understanding your various 401(k) options when you are planning on terminating your relationship with your current employer can be difficult. To add clarity and guidance, schedule a meeting with a Certified Financial Planner™or investment advisor representative at Harvest Wealth Partners. We have the experience and financial savvy you’re looking for. Reach us today online or by phone to get started.
Harvest Wealth Partners is committed to helping our clients work towards a successful future. We believe in your potential to understand the financial options that can lead you to your goals. Call us today to partner with our team. We look forward to continuing our mission for years to come.
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