Identify Your Needs

I am concerned whether I should roll my 401(k) into an IRA.

You’ve invested for retirement in hopes of making your dreams for the future a reality. However, there are important factors to consider that could make the difference between a substantial nest egg and a smaller one that’s been reduced by unnecessary taxes.

When determining the best way to get the most from your retirement funds, it’s a good idea to work with an experienced financial advisor who can help you develop – and stick to – a personalized strategy. When you contemplate the possible consequences of not having a plan – tax penalties, reduced assets and an austere life after your work years – it’s definitely worth the extra effort.

As you think about what to do with the money in your tax-deferred 401(k), keep these questions in mind:

Do you want to leave your cash with your employer?

This may seem like the easiest way to handle retirement funds, but it may cost you in the long run. That’s because your former employer probably won’t have your best interest at heart.

Do you want the money now?

While this may seem like a good idea at first, you won’t be doing yourself, or your future, any favors. Ordinary income taxes would apply on whatever portion is not rolled directly into an individual retirement account. Furthermore, if you’re less than age 59 ½, you are subject to an additional 10% federal tax as a premature withdrawal penalty. State taxes may also apply. Moreover, it could take years to replenish those funds.

Do you want to continue saving and pay taxes later?

This is a better option if you’d like to continue deferring taxes while maintaining control of your money. In this case, consider transferring your accumulated assets directly from the current plan into a traditional IRA.

Do you want to withdraw money at retirement tax-free?

If so, a Roth IRA can help. You must first roll over the assets from your employer’s plan into a traditional IRA, then establish a Roth IRA. You’ll pay a one-time tax now, but, ultimately, you’ll withdraw your money tax-free at retirement.

With a well-developed approach, it’s possible to avoid many of the negative implications that may be associated with withdrawing funds from your employer’s retirement plan. For more information about your retirement planning options, including the Raymond James Self-Directed IRA, contact your Raymond James financial advisor or use the Office Locator to find our office(s) nearest you today.