Podcast Episode 322: When Should I Rollover My 401k?

We want to be as efficient as possible with our retirement accounts to give us the best chance to grow our money and provide the income we need for retirement. That’s why many people ask about rollovers and whether it makes sense to do that with their 401k. Let’s talk about who might and might not benefit from a rollover and the options you have for your old 401k accounts.

We brought on Matt Pastor, RICP®, who has been a financial advisor with Johnson Brunetti since 2017, to help us with this conversation. It’s a question we get asked a lot and a conversation we have with many of our clients.

It’s first important to know what happens at the age of 59 and a half. First, there’s no longer the 10% IRS penalty to remove money out of your 401k. And second, you are eligible for a service rollover, which means you can move money out of the 401k and into a traditional IRA while still maintaining your employment with that company.

With that said, this decision often comes when you’re moving jobs. The old 401k plan is often forgotten about and left untouched because you usually don’t need that money for many years. The primary benefit of using this rollover strategy is diversification. Moving your money from a 401K to an IRA broadens your investment horizon, giving you more options for investment. However, it’s essential to consider your unique situation.

Now, when you change jobs, you essentially have four options to choose from for your 401k. The first option you have is to do nothing and leave the money where it is in the 401k plan. The second option is to move the money from your old 401k into the new 401k plan with your new company. For the most part, you will be welcome to do that and it’s an option to help consolidate.

The third option is you can take a cash payment, which is something we don’t typically recommend because of the tax ramifications that come along with pulling all of that money out at once. And finally, you have the option to roll the money over into a traditional IRA, which gives you more access and flexibility with your money.  

The bottomline is you need to be getting some guidance with all of this. It’s not an easy decision and there are nuances for each situation, which isn’t something you’d be expected to know on your own. That’s when we’ll sit down and talk through those options with you to determine which is the best fit. You can also take advantage of our ultimate 401k Guide by reaching out and letting us know you’re interested.

Here’s what you can expect to learn in this episode:

• The different qualifying events that usually make people consider the rollover.

• Why would you want to do a rollover in the first place?

• Assuming you’re eligible, why wouldn’t you want to roll the money over?

• What option do you have if you want to retire before 59 and a half if you don’t want to move all the money out of your 401k.

• The fear or apprehension that comes with moving money out of a 401k.