Since there is so much uncertainty right now, many are making predictions about where the economy is headed, when the virus will subside, and when we will return to “normal.” While no one can be sure, it’s worth considering the future when planning for it.

Taking a long-term view of your finances may help you avoid making decisions based on panic. It also means planning for a long retirement. 49% of Americans say running out of money is their primary retirement concern, according to a recent study. This makes sense, considering that average lifespans have been steadily increasing for decades. And if this is a concern of yours, you might decide to focus on making sure your savings will last the rest of your life, regardless of what happens with the markets in the next few decades.

Retirees don’t have to passively sit back and hope the market acts in their favor. If you’ve saved and built your wealth over the decades, you have options for how to fund your retirement. Deciding how to use your retirement accounts, minimizing your taxes, and mitigating risk can be difficult to achieve without the right plan. A qualified financial advisor can help you develop a comprehensive retirement plan based on your unique financial situation.

Recent events may have affected you, but there are things you can do about it to help keep yourself financially on track for the long term. Whether you’re in or nearing retirement give us a call at 855.425.4566. Or sign up at deckerretirementplanning.com/scheduling to sign up for a complimentary financial review so we can get started on a plan to suit you and your unique financial planning needs.

With rising unemployment or potential job changes, this leaves a decision of what to do with your 401(k). So, we want to discuss options for your 401(k) if you lose your job due to COVID-19 or leave your job in general.

There are a few options for your 401(k) after you leave a job, including leaving it where it is, cashing out, and rolling it into an IRA.

It’s important to make the right decision to avoid a higher tax burden so you can make the most of what you’ve saved.

One option is to keep your 401(k) at your old job.

  •  One thing to consider is how much you’re paying in 401(k) fees.
  •  You will no longer receive benefits such as an employer match.
  •  You may have fewer investment options with a 401(k) than if you moved it to an IRA.
  •  If you have less than $5,000 in your 401(k), you might not be able to keep it at the old company.

Another option is to cash out of the 401(k).

  •  You can take the money out of your 401(k) upon leaving a job, but this could mean owing penalties and tax.
  •  Normally there is a 10% penalty on early 401(k) withdrawals, but the CARES Act has waived that for up to $100,000 if you’ve faced financial hardship due to COVID-19.
  •  You will still owe income tax on whatever you can withdraw, but if you’re taking it out under the CARES Act, you can spread payments out over three years.
  •  Another option is to roll over an old 401(k) into an IRA.
  •  If you do a direct rollover, you won’t have to pay income tax on the amount you roll over.
  •  However, you could have to sell some of your stock when moving your money into an IRA and be out of the market while moving the money.
  •  Rolling it over to an IRA may allow you to consolidate your retirement funds, which simplifies your finances.
  •  IRAs can offer lower fees and more investment options than 401(k)s.

7 Advantages of Rolling 401Ks to IRA

  1. More investment choices.
  2. Better communication.
  3. Lower Fees and Costs.
  4. The option to roll IRA to Roth.
  5. Cash Incentives from custodians to earn your business.
  6. Fewer rules.
  7. Estate planning advantages by assigning beneficiaries to your IRA account.

The Bottom Line

For most people switching jobs, there are many advantages to rolling over a 401(k) into an IRA. That being said, a lot depends on the specifics of the 401(k) plan, both the old employer’s and the new one—investment options, fees, loan provisions, etc. It also matters how these terms and features compare to those offered in an IRA, which you could establish with a brokerage or bank.

You could also have the best of both worlds. You don’t have to roll all of your money into an IRA. Some of your balance can remain in your former company’s 401(k) if you’re happy with the returns you’re receiving. You can then set up a new IRA or rollover the remainder into an existing account or a new rollover IRA. After you’ve done your rollover, you can contribute to both your new company’s 401(k) and an IRA (traditional or Roth) as long as you don’t go over your annual contribution limit.