Types of 401(k) Rollovers
There are three main kinds of 401(k) rollovers:
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Direct Rollover
A direct rollover means transferring funds directly from the old 401(k) plan into another retirement account, either an IRA or new employer-sponsored 401(k). The funds get paid directly from one institution to another, which minimizes taxes and penalties.
This is advisable because it is straightforward, and federal taxes are not withheld.
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Indirect Rollover
When it is an indirect rollover, you get the money from their 401(k); you have 60 days to reinvest it in another retirement account. If, under any circumstances, you do not transfer the funds within 60 days, the IRS will consider the transaction as a distribution and hence therein shall become liable for taxes, plus another 10% penalty for early withdrawal.
Typically, in such an indirect rollover, the employer will withhold 20% of the funds for tax purposes. You must deposit the total amount of the original distribution, including the amount withheld, to avoid taxes and penalties.
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Rollover to New Employer’s 401(k)
If your new employer has a 401(k) for Verizon that accepts rollovers, you can transfer your old 401(k) into the new one. That’s good for those who like to keep their retirement money in one account. Transferring to a new 401(k) plan allows you to avail yourself of employer-matching contributions.
The Benefits of a 401(k) Rollover
Rolling over your 401(k) has several important benefits:
- Consolidation of accounts: Keeping track of retirement accounts with various employers can take time and effort. When you roll over your money into one account, it revolutionizes the way you track your retirement savings.
- More Investment Options: Most employer-sponsored 401(k) plans have limited investment options. By rolling funds over into an IRA, you may avail yourself of more investment options, such as individual stocks, bonds, mutual funds, and other investment vehicles.
- Lower Fees: Some 401(k) plans charge excessive fees, depleting investment returns. Transferring funds to an IRA can give you access to lower pricing that may help you save more over time.
- Tax-Deferred Growth: The funds will continue to grow tax-deferred in the case of a rollover, and you pay no taxes on investment earnings until retirement withdrawals.
Steps to Rollover a 401(k)
- Decide on the Type of Rollover That Suits You
First, decide whether to do a direct IRA rollover, an indirect IRA rollover, or a rollover to the new employer’s 401(k). If simplicity and usually avoiding taxes are your desires, then direct Rollover.
- Choose your New Account
If you are rolling your money into an IRA, you must open a new IRA account if you still need one. You can even shop for an IRA provider offering low fees, a range of investment options, and helpful customer service. Most financial institutions provide relatively easy processes for setting up an account:
- Reach Out to your Old 401(k) Provider.
If you would like, inform your old employer’s 401(k) provider that you intend to do a rollover. They will likely send you a distribution form or direct rollover paperwork.
- Transfer the Money
In the case of a direct rollover, the money is transferred directly from the 401(k) provider to the institution of the new account. In the case of an indirect rollover, you must be ready to receive the check for your distribution, which you must redeposit in the new account within 60 days to avoid taxes and penalties.
- Invest Your Money
Once the funds land in your new account, consider the available investment options and settle on one that best suits your retirement goals and personal risk tolerance. Based on your needs, you can invest in one or multiple types, such as stocks, bonds, and mutual funds.
Rollover of 401(k) for Verizon can be essential in getting the best out of your retirement savings, provided you do it right. Whether you are looking to roll over your 401(k) or explore your options, take the time to contact M&A Wealth today. Our financial advisors bring experience and knowledge to the table to guide you through decision-making and those that work best for your retirement goals; take control over your retirement.
