Check Capital Management

Consolidating 401(k) and IRA Accounts

Getting Retirement Ready

At some point, there’ll be an alarm that goes off in your head awakening you to a situation that you know exists but have largely ignored.  That alarm may ring when you’re 50 or 60 years old or even as late as 12 months before retirement.  It just depends on the person.  And exactly what, you might ask, is this alarm supposed to trigger?

 Answer:  Getting your financial life in order so that you’re in shape to retire or have a better handle on when it’s best to do so.  Indeed, the time is coming when the money that’s existed in your periphery for years or decades shifts to the front and center, so you owe it to yourself to make sure you’re on the right track.

 We strongly recommend you do this sooner rather than later because there might be options available to you of which you need to be aware.   Here are a few of the most typical…

 #1:  I’ve gone through a job change, my 401(k) balance is very high, and I don’t know if I should roll it to my new employer’s 401(k) or do something else.  What are my options?

 Answer:  When you terminate your employment and subsequent participation in an employer-sponsored 401(k) plan, you have four alternatives available to you:

  • Leave the money in your former employer’s plan, if permitted.
  • Roll the assets over to your new employer’s plan (if one is available and rollovers are allowed).
  • Authorize a rollover to an Individual Retirement Account (IRA—Traditional, Rollover or Roth).
  • Cash out the account value.*

Each of these options is worth exploring, because knowing what’s available empowers you.  One of the benefits of rolling out of a 401(k) plan and into an IRA is that you get to choose how you’d like your account managed.  You could do it yourself or hire an advisor.  We’ve found that when balances grow, folks tend to start second-guessing their abilities—or become anxious when they consider their investment options.  This indicates a sensible time to work with a financial advisor.

#2:  I’m with my same employer, but I’d like to move my retirement savings somewhere else.  What are my choices?

Answer:  Investigate an “in-service” 401(k) rollover.  If your employer allows for an in-service rollover, you can keep your 401(k) open but are allowed to move a certain amount outside the 401(k) and into an IRA.  (No taxes will be incurred when done properly.)  The age at which you can do this and the amount you can roll over depend on how your plan is set up.  Call your HR department and ask them:  “Do we allow for in-service rollovers on our 401(k)?  If so, at what age can I do this and for what amount?”  (It will either be the full amount or some percentage of the total.)

It’s possible the HR department will refer you to the company’s retirement-plan provider to answer the questions above.  If they tell you that in-service rollovers are unavailable to you, ask them if they allow for any portion of the 401(k) to be self-directed.  Many companies that use Fidelity Investments for their retirement planning services allow something called Brokerage Link.  If this avenue is available to you, it means you can open a new account within your 401(k) that will allow you and/or a financial professional to access investments other than those offered to you in your company’s retirement plan.  We’re quite familiar with this process and can help educate clients about their options.

#3:  I’ve now worked for several companies and have three separate 401(k)s, each of which is still with a different ex-employer.  What can I do?

Answer:  Once you leave your employer, you’re allowed to move the money to another retirement plan without any tax consequences.  As with question #1 above, you have options/choices.  Many individuals eventually choose to move their 401(k) away from their old employer, especially when the number of old jobs and inactive 401(k) accounts begin to add up, making it more difficult to keep track of everything.  You can choose to consolidate all your old 401(k)s into IRAs if you like—or even (more simply) into one IRA (Traditional, Rollover or Roth).

#4:  My 401(k) account balances have grown to be a significant part of my net worth.  I think I need professional guidance; where do I turn?

Answer:  You’re not alone with these feelings.  For some of us, the closer we get to retirement and the larger those account balances become, the more anxiety it can cause.  Finding an investment professional, financial planner, financial advisor, etc., is often an arduous task.  We’re a firm that enjoys helping to clarify complex retirement decisions, and we’ll be not only candid but transparent in our communication as well as approach to investing.

It’s important to take the first step when you get to this point because, as Benjamin Franklin counseled, “Remember that time is money.”  The sooner you can course-correct and find an advisor who’s right for you, the better the end result should be.

If you’re considering the consolidation of various 401(k)s and IRAs as a logical next step, sit down with an investment professional on our team.  Check Capital Management Inc. is an SEC-registered investment advisory firm with decades of experience and has earned accolades from well-known publications and outlets. 

For most people, long-term wealth and financial satisfaction are more important than anything except personal health and family.  So don’t hesitate to address such a vital priority in your life:  You’ll feel relieved once you’ve taken this step…and probably find it helps to finally free you of concerns you’ve long held onto.” 

*Cashing out prior to age 59½ can trigger early-withdrawal penalties and tax liability. 

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