Letter from the President: Transferring your 401(k) Plan

Changing Jobs or Caught in Downsizing? What You Need to Know When Transferring Your 401(k) into an IRA Rollover.


Do you have an employer sponsored 401(k) and are faced with either a job change or your company has downsized? What should you do with your retirement plan? Leaving the 401(k) at your previous employer may be the least attractive option. Does it make sense to leave one of your most valuable assets with a company which you are no longer associated with? Usually the answer is no because it is more difficult to manage your 401(k) and there are often more attractive options available elsewhere. Also, companies often change the firm that is handling the 401(k) plan. As a result, you may find that not only do you have to select new investments, but also deal with a new custodian who may offer little or no advice. Just as you have to pack up your belongings when leaving a company, you may want to take your 401(k) with you, too.

Will my 401(k) Rollover be Subject to Tax?


The question most individuals want to know is, “If I transfer my 401(k), will I incur taxes?” If done properly via a “direct rollover”, the transfer of an existing 401(k) into an IRA Rollover is not subject to either taxes or penalties. The independent financial advisor will complete the necessary paperwork to notify the current custodian to transfer the assets directly to the new custodian.

What If I Need Additional Income?


Adjusting to forced retirement isn’t easy. If you weren’t financially prepared, you may ask if you can tap into your 401(k) for additional income without incurring a penalty. If you are not 59 ½, the IRS levies a 10% penalty for any early withdrawals. However, you may be eligible for an “early” or “premature” distribution, but the rules and regulations are specific as to whom and how distributions qualify for penalty free withdrawals. Early termination is one of the special conditions if all requirements are met. However, be aware that even if the withdrawal qualifies as a penalty free withdrawal, it is subject to taxes.

How Will I Know What Investments to Choose?


A 401(k) is generally limited to a selection of mutual funds which consists of stocks, bonds, international stocks, and cash investments. The 401(k) is a one size fits all approach to investing since the same funds are offered to every participant in the plan. One advantage of an IRA Rollover is that the independent financial advisor can custom design an IRA that is just for you, selecting investments that meet your individual needs, now and in the future. You work together to personalize your IRA and make changes when necessary. Not only do you know what investments you own, but you also have an independent advisor who is there for you.

Is this the perfect time for you to take control of your 401(k) plan by seeking out professional and knowledgeable independent advisors with over 39 years of experience? At OMC, we have helped many clients, just like you, transition from a 401(k) to an IRA Rollover.

Let’s talk.