Rolling over your 401(k) with Brite USA
Rolling over your 401(k) with
Visit Brite USA to learn about rolling over your retirement money. By rolling over your retirement account, you may be able to consolidate your assets and gain access to the resources and investment options offered by Brite USA. Consider all your options and determine whether a rollover is the best option.
Features of a rollover
- Maintains the tax-deferred status of your retirement investments.
- Online access through the custodian of choice.
- If you are able, make contributions to your IRA.
- Access to a wider range of investment options than most employer-sponsored retirement plans.
Should I roll
over my 401(k)?
Each option has unique benefits and drawbacks regarding investments, fees, and withdrawal/loan policies. If you have several retirement plans, weigh your options.
Consider the advantages and disadvantages of each strategy as you decide which would best serve your retirement objectives. Use the information below to guide your decision. Also, consider any potential advantages of having all your assets under one roof and any practical justifications for maintaining multiple accounts rather than merging them.
What are some advantages of rolling over an account?
The plan administrator sets the limits on the investment options available in most 401(k) programs. You’ll likely choose from various mutual funds that are sometimes offered by a single supplier.
Many different IRA plans are available, providing a wide range of options. Additionally, several investment options are available to you, such as individual stocks, bonds, and exchange-traded funds (ETFs), to mention a few.
By transferring your funds into an IRA, you may spend less on management and administrative expenses, diminishing your investment returns over time. The 401(k) plan’s funds can be more expensive than average for their asset class.
Of course, there will be expenses associated with your IRA. However, you will have more options and control over how, where, and how much you invest. It is important to compare the costs of your current plan(s) to any IRA rollover proposal.
Because companies have a lot of flexibility in setting up their plans, it can be challenging to understand a 401(k)’s requirements.
The IRS regulations governing taxes on distributions are a frequently ignored distinction between a 401(k) and an IRA. The IRS mandates that 20% of 401(k) distributions be returned for federal taxes. You can choose not to have taxes withheld when you receive a distribution from an IRA.
It is probably good to have some tax withheld to avoid a high tax bill at the end of the year and facing interest and penalties for underpayment. Instead of an automatic 20% deduction, you can decide how much should be made to reflect the amount you’ll owe more appropriately.
The advantage is that you’re preventing premature depletion of your retirement account and enabling that money to continue accumulating tax-deferred. Brite USA does not provide tax advice, and you should consult with a tax advisor for further information.
The key differences between a rollover IRA and a Traditional IRA or Roth IRA
You should consider moving to a Roth account if considering an IRA rollover. A Roth IRA is the favored rollover choice if you have one of the increasingly popular Roth 401(k)s.
When you contribute to a Roth IRA, you must pay income taxes on that money in the year you do so. However, there is no tax due when you withdraw funds in retirement. That is the antithesis of a conventional IRA. Additionally, a Roth IRA does not demand required minimum distributions (RMDs) at age 73 or at any other time. The required income taxes have already been paid.
Individual retirement accounts, such as traditional and Roth IRAs, may offer tax benefits for retirement savings. A standard or Roth IRA that receives assets in a rollover from an employer-sponsored retirement plan account is known as a rollover IRA.
Your prior employer-sponsored plan account can be rolled over to a standard IRA or a Roth IRA. A traditional IRA and a Roth IRA accept rollovers of pre-tax and post-tax assets.
Any earnings and pre-tax contributions (on both pre-tax and after-tax assets) you rolled over would be subject to income tax. You can also convert non-Roth assets (pre-tax and after-tax assets) at rollover time into a Roth IRA.
You can read our guide on the difference between roth and traditional 401(k) plans here.
What are the contribution limits during a rollover?
You may transfer as much money as you like from your 401(k), 403(b), or another retirement account, but you may also make extra IRA contributions.
Consider different IRA programs if you’re currently maxing out your existing 401(k) or 403(b) but would like to invest more for retirement.
The differences between an indirect rollover and a direct rollover
In a direct rollover, the financial institution where you started your IRA receives the check from your employer-sponsored plan on your behalf. No taxes are deducted because this money is transferred straight from the 401(k) or other qualifying retirement plan to the IRA.
The check is written out to you during an indirect rollover. Your former employer makes an obligatory 20% tax withholding. The 20% withheld will be regarded as a taxable distribution, and only 80% of the money will have the opportunity to grow tax-free or tax-deferred if you do not deposit the funds into an IRA within the 60-day window.
Also, if you are under the age of 59 ½, an additional 10% federal tax may apply.
What if I have company stock in my old 401(k)?
Some businesses provide the option to invest in company shares.
It is sometimes more cost-effective to take a “lump-sum distribution” of business stock if you have invested in it and it has increased in value rather than rolling it over when you roll over your 401(k) assets. Before choosing the best course of action, you need to consider several factors.
Ready to find out more?
If you want to understand the process of rolling over your 401(k), you can speak to us directly. We have a wealth of knowledge and experience helping clients to roll over their 401(k) plans. Contact us today to find out more.
Request a call back
Do you have questions about how Brite can help you. Please complete the form and we’ll get in touch shortly