The Cardinal Guide to Rollovers and Transfers: Protecting Your Retirement Funds

Share

Sign Up For Our Newsletter To Receive Weekly Updates.

Navigating the Complexity of Retirement Account Transfers

As we enter the retirement era, many of us will be faced with the prospect of rolling over or transferring funds out of our 401k, 403b, or an existing IRA. Employers offering pension plans are also increasingly giving their retirees a cash-out option. These actions can result in a significant amount of money that has not been taxed yet. It is crucial to understand how to handle these transfers to avoid unnecessary taxes and potential mistakes.

Why this Guide?

The process of transferring money out of a retirement account is a once or twice-in-a-lifetime event for many individuals. The lack of frequency coupled with the financial stakes involved makes this a potential ground for mistakes. Even a single missed step can cause complications.

This guide is aimed at providing an outline of things you need to be aware of when dealing with retirement account transfers, including how to avoid making errors that can lead to unnecessary tax burdens.

Maintaining Custodian-to-Custodian Transfer

During the transfer, the money should move directly from your 401k custodian to your new account custodian without you having to handle the funds personally. This type of transfer ensures the process is a non-taxable event.

What if You’re Taking Money Out of a 401k?

Once your new account is set up, you can request a rollover from your 401k to the newly opened account. Checks should be made out to the new custodian ‘for the benefit of’ your name, to ensure you don’t incur any tax withholdings.

Considering IRA Rollovers

Rolling over to an IRA can open up a broader range of investment options. You’ll have access to more diverse instruments such as ETFs, mutual funds, structured notes, and managed accounts. Additionally, you will be able to respond more quickly to changing market conditions.

Beware of 60-Day Rollovers

A 60-day rollover implies you take possession of the money and have 60 days to put it back in an IRA to avoid taxation. There are significant risks and restrictions tied to this type of rollover. You can only perform one 60-day rollover in a 12-month period, and failing to adhere to these guidelines could lead to substantial taxes and penalties.

Understanding Your Fiduciary Duty

As your retirement advisors, we carry a fiduciary duty to act in your best interests. This responsibility includes providing advice that is in line with your financial goals and ensuring that all rollovers and transfers are conducted correctly to avoid potential penalties.

Navigating retirement account transfers can be daunting, but with careful planning and professional guidance, you can ensure that your retirement funds are secure. Remember, the goal is to protect your funds and plan for a comfortable retirement. So, let’s work together to make this happen!

Rollovers – 401k,403b,IRA,Pension Cash out → IRA

In this video, we discuss the importance of correctly handling your 401k, 403b, IRA, or pension plan funds’ rollover or transfer to a cash-out option, now widely offered by employers at retirement. Tom and I highlight potential tax pitfalls, the significance of custodial transfers, and we provide guidance on setting up an IRA account under professional management. We also explore the advantages of rolling over to an IRA, including diverse investment options, prompt market response, and improved tax planning, along with situations where retaining a 401k may be advantageous. This episode aims to guide your retirement funds’ decision-making process, emphasizing problem prevention over solution.

Get In Touch

Contact us today with any questions, concerns, or just to stay connected.

Contact Us

Have questions? Contact us today.

[contact-form-7 id="d91790a" title="Contact Us"]

The Cardinal Guide to Rollovers and Transfers: Protecting Your Retirement Funds

Share

Sign Up For Our Newsletter To Receive Weekly Updates.

Understanding the Upcoming 2026 Income Tax Increase: What You Need to Know

A Brief History of the Tax Cuts and Jobs Act (TCJA)

In today’s Cardinal lesson, we’re discussing the significant changes coming to income tax rates in 2026. This isn’t a proposal but a law already set in motion. The Tax Cuts and Jobs Act (TCJA), passed in 2017 and effective from January 1, 2018, brought about substantial reductions in income taxes. However, these reductions were only funded for eight years, meaning they will expire at the end of 2025.

What Changes to Expect in 2026

As of January 1, 2026, the tax rates will revert to their 2017 levels, adjusted for inflation. Key changes include:

  • The 12% bracket will increase to 15%.
  • The 22% bracket will rise to 25%.
  • The top rate of 37% will revert to 39.6%.

Not Just a Proposal

It’s crucial to understand that this change is already the law. Many people mistakenly believe that the tax rate increases are still under discussion. However, unless Congress enacts new legislation, these higher rates will take effect as scheduled.

Implications for Your Financial Planning

Impact on IRAs and 401(k)s

With the current lower tax rates, now is the time to consider strategies like Roth conversions. By converting funds from a traditional IRA to a Roth IRA now, you can potentially save a significant amount in taxes over the long term.

Why Planning Ahead is Crucial

For individuals with substantial retirement savings, understanding these changes is vital for effective tax planning. The window to take advantage of the current lower tax rates is closing, and planning ahead can make a significant difference.

Case Studies and Planning Opportunities

Hans Scheil and Tom Griffith discuss specific case studies and planning strategies in our latest video. These examples illustrate how different scenarios can be managed effectively:

  • Case Study 1: A married couple with an adjusted gross income of $150,000 in 2024 can convert part of their IRA to a Roth IRA, taking advantage of the lower current tax rates.
  • Case Study 2: High-net-worth individuals with large IRAs can save substantial amounts in taxes by planning conversions over the next two years.

Estate Tax Considerations

The TCJA also doubled the estate tax exemption, which will revert in 2026. This change can significantly impact high-net-worth individuals, making estate planning more crucial than ever.

Action Steps to Take Now

  • Review Your Current Tax Situation: Analyze how the upcoming changes will affect your finances.
  • Consider Roth Conversions: Take advantage of the lower tax rates before they expire.
  • Plan for Estate Taxes: Assess your estate plans in light of the changing exemptions.

Conclusion

The changes coming in 2026 are significant, but with proper planning and informed decision-making, you can navigate these changes effectively. Watch our video for more detailed insights and personalized advice.

Get In Touch

Contact us today with any questions, concerns, or just to stay connected.

Contact Us

Have questions? Contact us today.

[contact-form-7 id="d91790a" title="Contact Us"]
Scroll to Top

Ansylla Ramsey

OFFICE ADMINISTRATOR

Caleb Bartles

Life, Accident & Health insurance

Daphne Sutton

ADVISOR

Tommy Fallon

ADVISOR

Weekly Email

Want to get important updates first?

Don’t miss out on any important info, from Medicare deadlines to taxes, we will keep you updated! Try it out, you can always unsubscribe at any time.

Newsletter