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Retirement Place > Retirement Planning > Qualified Plans: Small Business, Group & Enterprise Retirement Accounts
Changing Jobs? Get Help with 401(k) Options
 

401(k) Rollovers


Switching jobs? Take a look at your options for reinvesting your old 401(k) before jumping into your new employer’s retirement program, leaving your old 401(k) behind or rolling over to an IRA. Place Trade’s advisers know that there is no “one size fits all” strategy when it comes to planning for retirement. Getting acquainted with you and your financial plans today allows us to help you reach your goals for the future. Speak with one of our retirement specialists about your 401(k) action plan today.

 

What is a 401(k)?

Traditional and Roth 401(k)s are employer-provided tax deferred retirement savings tools, both offered at Place Trade. How do they work? Employees may choose to have their employers contribute a set percentage of their pre-tax paycheck to their 401(k) fund. Although not subject to income tax withholding, wages put into a 401(k) ARE subject to Social Security, Medicare, and Federal Unemployment taxes. The IRS and your specific 401(k) plan both set limits on the amount of money that an individual may elect to contribute to his or her 401(k) plan annually.

The advantages of keeping a portion of your retirement savings in a 401(k) plan rather than an IRA include the ability to borrow against your account, protect it from creditors under certain conditions, and make additional contributions to your account. Hardship withdrawals can be taken, although they are not treated as eligible rollover distributions. Distributions taken before the age of 59 ½ garner a 10% early distribution penalty. Different plans have different distribution requirements: some may provide for non-periodic distributions while others require you to take distributions annually.

 

 

401(k) Type

 

 

 

Tax Rules1

 

 

 

Withdrawal Rules2

 

Traditional  

 

Contributions are made from each paycheck on a pre-tax basis (before taxes are taken out).

Your taxable income decreases by the amount that you contribute to the plan.

Upon withdrawal, you must pay income taxes on contributions and earnings.

You must begin taking required minimum distributions/withdrawals (RMD) by age 70 1/2.

 

 

You cannot withdraw your funds without incurring a 10% penalty for early withdrawal before either:

  • reaching the age 59 1/2, or 
  • you are retiring at age 55 or older.

 

Rule 72(t) May allow early distributions from your 401k (or IRA)

Roth  

 

Contributions are made on an after-tax basis.

There are no taxes paid upon withdrawal.

No minimum withdrawals are required. 

 

  You may withdraw money at any time so long as you have held the account for more than 5 years or more. 
Contribution Limits       

 

Employee:

  • Up to $18,000 in 2017.
  • Additional contributions can be made by participants age 50 or over.

Employer / Employee Combined:

  • Contributions per participant up to the lesser of 100% of compensation1 or $53,000 in 2016 and $54,000 for 2017.
  • Employer can deduct amounts that do not exceed 25% of aggregate compensation for all participants.

 

   

Employee:

  • Up to $18,000 in 2017.
  • Additional contributions can be made by participants age 50 or over.

Employer / Employee Combined:

  • Contributions per participant up to the lesser of 100% of compensation1 or $53,000 in 2016 and $54,000 for 2017.
  • Employer can deduct amounts that do not exceed 25% of aggregate compensation for all participants.

 

1,2For complete rules regarding 401(k)s, please visit www.irs.gov and speak to your tax and/or legal advisor.

Distribution requirements are dictated by the plan itself, and participants must either receive all benefits from the plan or begin receiving distributions by a specific beginning date (April 1st of the latter of the year that the participant retires or the year he or she turns 70 ½). Plan administrators are responsible for determining the minimum required distribution for each calendar year. However, if you find yourself switching employers before it is time to take advantage of your retirement plan’s benefits, you have several options. You can roll over your investments to an IRA, transfer them to your new employer’s 401(k) plan, or in some cases, you can leave them where they are.

 




What now? Deciding what to do with your old 401(k).


Rolling over to an IRA:
Transferring your retirement nest egg to a self-directed IRA allows you increased freedom when it comes to your investment choices. The ideal means of moving your 401(k) account’s contents into an IRA is a direct rollover rather than a cash transfer. Direct rollovers cut out the part of the transfer process in which your former employer takes a 20% tax withholding out of your account in case you choose not to reinvest your 401(k)’s contents in another retirement plan. (Side note: even if you are transferring over to your new employer’s 401(k) plan, a trustee-to-trustee transfer is the most effective way to move your money. Once your 401(k) plan provider writes you a check for the value of your account, you have only six months to complete the transfer, otherwise, that 20% tax withholding is extracted and lost forever.)

If you have company stock sitting in your 401(k) account with your old employer, deciding what to do with it when you transfer your 401(k) can be a challenge. If you rollover your account into a plain IRA, the entire value of your stock positions will be subject to income taxes. However, if you liquidate your holdings and transfer their value into a traditional savings account, you only pay income tax on the original purchase price of the stock, and any increase in the value of the security since its purchase date is subject to capital gains tax instead.

 

Cashing out or leaving your plan behind:
Cashing out of your 401(k) plan is perhaps the most ineffective (and tempting) of your options as you move on to a new employer. If you choose to cash out 100% of the contents of your retirement account becomes taxable, and you are also hit with as well as a 10% penalty for early withdrawal if you’re under 59 ½ years of age. Leaving your plan behind at your old employer can also be more expensive than you might believe: plan managers often charge annual fees of 2 or 3 percent just to hold your 401(k). Compare your 401(k) maintenance fees to those of a Rollover IRA to determine whether you are better off leaving your account where it is or updating its form and location. Self-directed IRAs have several advantages over 401(k)s, among which are explained investment options, generally lower fees, and more liberal withdrawal requirements. More information on IRAs can be found via our Retirement Planning page. Even if the fees are lower for an IRA other factors may make leaving your 401(k) where it is the most fiscally effectual decision. Just beware the dangers of leaving your money out of sight: do not forget to rebalance your portfolio periodically. Ensuring that your money is working for you in the most effective way possible is key to retirement success.

Joining your new employer's 401(k) plan:
Before you transfer to your new employer’s 401(k) plan, familiarize yourself with the investment options offered by the new plan. If your previous employer’s plan made a wide variety of mutual funds, bonds, and money market investments available, you may find the selection at your new company restrictive. Make sure you are up to date on the IRS’s contribution limits for 401(k)s as well and have ensured that their limits are compatible with your retirement planning strategy. Below are listed the contribution limits for 2016 and 2017. Limits will be indexed to inflation in 2017 and beyond. 

 

 

401(k) Type

 

 

 

Monetary Amount

 

 

 

Conditions

 

Participant Contribution  
  • Up to $18,000 in 2016
  • Up to $18,000 in 2017
 

Salary deferrals made into other qualified plans count against contribution limits

Participant Catch-up Contribution  
  • $6,000 in 2016
  • $6,000 in 2017
  Catch-up contributions can be made by participants age 50 and over.   

Maximum Contributiont Employer may Deduct

(Includes both Employer & Employee)

   

    25% of payroll

 

Payroll limited to:

  • $265,000 in 2016 
  • $270,000 in 2017

Maximum Allocation to Participant's Account

(Includes both Employer's & Employee's combined contribution) 

  The lesser of 100% of participant's total pay or $54,000 in 2016 and 2017.  

 

1,2For complete rules regarding 401(k)s, please visit www.irs.gov and speak to your tax and/or legal advisor.


Please be sure to check with your tax and/or legal advisor prior to making any contributions, withdrawals or other changes to your retirement account. Place Trade Financial, Inc. does not offer tax or legal advice. Information provided by Place Trade is for educational purposes and should not be considered as tax or legal advice under any circumstances.   


Retirement plan specialists are available to help you assess your options and determine which retirement planning strategy best fits your needs.

 

   

Call us today at 919-719-7200 or 800-50-PLACE to get rolling!

   

Changing Jobs? What to Do With an Old 401(k) 

 

Retirement Planning: Individuals

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  Trade Options | Margin IRA IRA Trading Permissions Get Advice or Trade Online Cashing Out your 401(k) Switching Jobs? View Options From Ramen to Retirement  

What can you do with your 401(k) when you change jobs? Get straightforward advice about your retirement plan options so you can make smart decisions! How to Roll Over Your 401k. 401k roll over
  Full-service financial planning and investment advice are available to all of our US clients. Please speak with your full-service financial professional regarding pricing for specific services. Full-Service commissions and fees vary by products, services, and Investment Company. Additionally, full-service commissions are different from and are not included in the deep discount online trading commission schedules listed on this website. Please consult with your tax and/or legal advisor before making any tax and rollover related decisions. Place Trade does not offer tax or legal advice.  

 

Make smart decisions with your old retirement plans today so that you can maximize your potential and get the most of your financial future!

 

Rollover your old 401(k) to a Place Trade Self-Directed IRA or Speak with one of our Experienced Financial Consultants to get Advice on your options or help develop a new financial plan.

 

 


What is a 401(k)? What is a 401k roll over?

 

What is a 401(k)? 

 

Learn How to Rollover a 401(k) (Open an account, fund it and start trading!) Learn How to Roll Over Your 401k

 

401(k) Rollover options 

Changing Jobs? What should I do with my old 401(k) retirement plan? Know your options

 

Can I Rollover my 401k to an IRA? View Retirement Plan Rollover Chart 

 

Should I rollover my 401(k)? Know your rollover options

401(k) Rollover Rules Cheat Sheet

Can I move my 401k to a Roth IRA?

Not directly. You will need to roll your 401k) over to a Traditional Rollover IRA first and then you will be able to roll it over to a Roth IRA, keeping in mind that you will pay taxes on every dollar that you take out of your Rollover IRA and this could cause your overall tax bill to increase! You should speak with your tax and/or legal advisor about the potential consequences in advance and if you should consider transferring only a portion at a time or in some other way to help spread out your tax bill. 

How long do you have to roll over a 401k?

60 days.

Can a 401k be rolled over into an existing IRA?

Yes, however, it is best to keep rollover funds separate from IRA accounts that you may make contributions to retain certain protections and avoid potential accounting nightmares down the road. 

Why Choose Place Trade for your Rollover IRA?
  • Flexible trading options: Trade online or work with an experienced full-service advisor
  • Widest variety of investment products and services including US & international trading, stocks, options, ETFs, bonds, and CDs as well as thousands of nonproprietary mutual funds including BlackRock, Fidelity, Vanguard, T. Rowe Price and many more - all within your IRA brokerage account!
  • Automatic investment options & thousands of mutual funds in your Investment company (non-brokerage) account.
  • Transparent, low cost: We are not hiding anything! There is no such thing as a free trade or a free lunch! Flat rate and free trades can be misleading so we prefer to avoid them. The only free trade we offer is one that we literally do not earn money on! 
  • Awesome Trading Tools & Multiple Trading Platforms
  • Great Service: It's true. We have actually won top ratings for our service. We work hard to earn your business! 
These are just a few of the reasons why Place Trade is the smart place for your old 401(k)! Click to learn more.

 

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Learn more about retirement planning by visiting some of the links below:

Roth IRA

SEP IRA

SIMPLE IRA

Traditional IRA

Qualified Plans

Rollover IRAs

Find out how Place Trade can help you get the most out of your college planning by visiting some of the links below:


Coverdell ESA

529 College Savings Plans

UGMA/UTMA Accounts