IRA Center This is the internet’s source for information on Retirement Accounts
for beginners and professionals. The following information covers traditional IRAs, roth IRAs, 401(k)s, 401(k)
rollovers, SIMPLE IRAs, SEP IRAs, 403(b)s, SARSEPs, Keoghs, Pension Plans. Do you participate in a retirement plan
through your employer? You may be illegible to start a Traditional or Roth IRA as well.
What Are Your 401k and Other Retirement Account Rollover Options
Options
Cash it out
Roll it into a self-directed IRA
Keep your account where it is and do nothing
Roll it into your new company's 401k (if allowable)
1. Should you cash out your retirement account?
If you are younger than 59 1/2, I would not recommend it. I can give you so many reasons
not to but the list would be extensive. First of all, consult your tax advisor and plan administrator
to determine the tax consequences involved. If you are under 59 1/2, there may be an additional penalty
tax besides having to claim any distributions as ordinary income. Early distribution tax is usually 10% but
for a SIMPLE IRA if you have participated less than two years, the tax can be as high as 25%.
Keep in mind, the money you have invested in your retirement account is compounding tax-deferred.
Click here (Future Value Chart) to see how your current
principle could grow at different rates of returns over a given period of time. The following is an example of
tax-deferred growth compounding over a given period of time.
EXAMPLE 1: The following
example assumes all distributions and gains were reinvested, the investments compounded at an annual rate of 10%,
and all earnings were tax-deferred. This example is shown for illustrative purposes only. It is purely
hypothetical and is not intended to imply the past or expected future investment results. Joe and Marge in
the following example are the same age and will both retire at the same time at age 65.
At age 25, Joe begins investing $2,000 every year into his 401k and stops after 10 years.
At age 35, Marge begins investing $2,000 a year into her 401k and continues to invest every year
for the next 30 years.
Joe has invested a total of $20,000 over a ten-year period. The value of Joe's $20,000
investment after 40 years when he is age 65 will be worth $584,006.
Marge has invested a total of $60,000 over a thirty-year period. The value of Marge's $60,000
investment after 30 years when she is age 65 will be worth $345,437. This is $238,569 dollars less than Joe's
even though Marge invested $40,000 more. Which investor would you want to be?
Note: If Joe had not stopped
making his $2,000 a year contribution and continued contributing for the remaining 30 years, his investment would
have been worth $975,704 by the time he was age 65.
2. Should you roll your retirement
account into a self-directed IRA?
Rolling your 401k or other retirement account to a self-directed IRA may be your best option.
If you keep your retirement account with your previous employer, your options are limited to the investments they
offer which in many cases may only be a few mutual funds and/or the company's stock. Furthermore, the company
is probably not providing you with the quality of service you would receive from a personal, full-service account
representative. Would you like a great example? Call your current administrator to perform a couple
of tasks and then call Scott
Ulves (toll-free 877-673-6472) and compare the difference. A personal, full-service account representative
can assist you in selecting investments according to your risk tolerance and investment objective as well as providing
you with an in-depth analysis of your current holdings. An in-depth analysis should not only provide you
with past performance result but also compare each investment on an individual basis to other similar investments.
Do you know how your current investments stack up? You should. If you would like a free in-depth analysis
of your current holdings, Click Here. If you roll your retirement account
to a self-directed IRA with Scott
Ulves, you can select just about any mutual fund available-load or no-load, any listed stock, bond, unit investment
trust, money market, and other investments. Not only will you have more investment options to choose from;
you will also have the quality service you deserve.
When you roll your retirement account to a self-directed IRA you should not incur any tax liability
providing the Rollover is done correctly. Please consult a financial representative, personal tax advisor
and/or current plan advisor to insure a proper rollover. If you have any questions or concerns, contact Scott Ulves toll-free at 1-877-OPEN-IRA.
3. Keep your account where it is and do nothing
Most employers will allow you to maintain your retirement account in their plan even if you leave
the company. Please read option 2 above if you are considering this.
4. Roll it into your new company's 401k (if allowable)
Some companies will allow you to rollover your previous retirement plan into their retirement
plan. Unless they are offering you the same or more investment options as a self-directed IRA and the full
and personal service of an investment professional, what would be the benefit? Please read option 2 above
if you are considering this. If you rollover your retirement account to a self-directed IRA and want the option
to roll that IRA to another 401(k), you must open a "conduit" IRA. You can not make any contribution
to or commingle funds with a conduit IRA.
