Financial Planning articles

AS SEEN ON:

What to do with  an old 401K?

When dealing with an old 401k account, there are usually 3 options:

  1. Keep it where it is.
  2. Roll it over to your current employer's 401k.
  3. Roll it over to an IRA (Individual Retirement Account).

So what is the best option? Of course, it depends on each situation, but many times I advise clients to rollover their 401k into an IRA*. Let me give you my own real-life example: I worked for Arthur Andersen in Auditing when I first graduated from college, and I vaguely remember being told about a 401k matching program. But I donít recall whether I contributed or not, I was only 22 at the time and not financially savvy back then.

Fast-forward 20 years later, when Arthur Andersen had already sunk like the Titanic, along with Enron. (Iím still in utter shock, I never imagined that could happen to a company that big!) It finally occurred to me that I might have some decades-old retirement money to claim, but it was too late. 401ks are not subject to a companyís creditors, but they can be ďabandonedĒ by a sinking company, making it harder for ex-employees to track down their accounts. I tried for some time and finally gave up my search.

Itís easy to forget about a 401k once you move on, or for loved ones to not know about it if something should happen to you. 401ks also may have limited investment choices, or potentially too much investment in company stock. They can involve high fees due to the administrative costs a company incurs to offer the plan. They can be restrictive and expensive in other ways as well.

On the other hand, there can be benefits to 401ks over an IRA, such as a more liberal loan policy, penalty-free withdrawals at age 55 vs 59.5 for an IRA**, or not having to pay taxes on net unrealized appreciation of company stock. There is also the rare advantage of not having to take RMDs (Required Minimum Distributions) for those over 70.5 who are still working with their employers.

Rolling over a 401k to an IRA may not make sense for everyone, but for many, it can be beneficial.  Contact me if you need guidance on what may be the best alternative for you.

* Note that if a rollover is not done properly, distributions received before age 59.5 can be subject to an early distribution penalty of 10% tax.

** Penalty-free withdrawals are permitted under the 72(t) rule, and for certain exceptions such as the first-time purchase of a home, higher education, and medical expenses.

Subscribe
to our Newsletter

Your Email:

Financial PlanningArticles

7 Audit Flags for the IRS High income earners and those claiming business or rental property losses appear more subject to IRS scrutiny . . . Will you run Out of Money one day? Will you have enough to last you for a lifetime, or will you run out of funds sometime after retirement? . . . The “Paris Hilton” Tax What is one of the reasons that the government created an Estate and Inheritance Tax? . . . Maximizing your Retirement Contributions there is a way to contribute more if you have your own small business. This applies even to those who have a one-person LLC . . . What to do with an old 401k? When dealing with an old 401k account, there are usually 3 options. What is the best? . . . Misconceptions about Wills There is a common misconception that if you have a Will created, it is enough to ensure that your assets will pass on smoothly to your heirs . . . TheRight Investment in the Wrong Place Sometimes you can make the right investment in the wrong place. How so? . . . Net Worth — do you know yours? Do you know what you are worth? It might be an eye-opener! . . . IRAs vs Roth IRAs To Roth or not to Roth?
That is the question! . . .
Can I get a tax deduction for my Home Office? Even if you are eligible to take a tax deduction for your home office, there are times it is not worth doing so. Why? . . . Why can't I just hire aFinancial Planner? How do you know who to hire? When you do hire someone, how do you know that they are doing a good job? What happens if . . . The Value of Value Investing When I used to visit India as a kid, the contrast between it and the US was striking. There were 5 black and white TV channels, women who wore saris . . .

Financial Planning
for Physicians

Why Physicians Spend More than they realize? Doctors spend more as they make more. But take away taxes, kids' educations saving, retirement, health issues . . . The INs & OUTs ofMalpractice Insurance 7.4% of physicians annually had a claim, whereas 1.6% made an indemnity payment . . . Physician ContractsProtect Yourself & your Interests When negotiating a contract for your new job as a practicing Physician, there are several important clauses . . . Disability Insurance & Income ProtectionNecessary but often Neglected! Your most important asset is not your home, your car, your jewelry, or other property. It's your ability to earn a living . . . Protecting your Assetsfrom Lawsuits & Creditors Is your wealth vulnerable to potential future creditors and, should the worst happen, could you lose everything? . . .

Learn more about the professional history of our
financial advisory team at FINRA Broker Check
Review our Form ADV
Read our Privacy Policy
Registered Branch:
18 Pemberton Drive, Matawan, NJ 07747 | Tel: 201-892-6094
© Copyright 2012-2017. All rights reserved.