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


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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.

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