How to Avoid 3 of the Biggest Mistakes With a 401k Rollover
You should consider your 401k rollover options very carefully if you get laid off or retire early. Deciding what to do with your retirement plan can be difficult especially after you get laid off or take an early retirement. This is not the time to make a hasty decision.
The first thing to understand is that you can make a very costly and irreversible financial mistake. The value of your retirement savings might be down due to a decline in the stock market. Many people have watched the value of their retirement savings fluctuate considerably over the years. The stock market can be very volatile, especially over short periods of time. Many people have also been affected by lower home values while living expenses keep going up.
Now is not the time to make a costly and irreversible mistake with your retirement savings. Take your time and get investment advice from a Certified Financial Planner and IRA rollover specialist. He or she will help you learn about your options when you leave your employer. Mistakes with your retirement plan can be made very easily and a financial advisor can help you avoid three of the biggest ones.
If you recently got laid off or if you are planning to retire early, here are three of the biggest mistakes you can make with your 401k plan:
- Taking Your Money Out Early. Taking a distribution from a traditional 401k plan means that you will pay ordinary income taxes on the amount that you withdraw plus a potential early withdrawal penalty tax of 10%. In addition to that, you will lose out on the benefit of continued tax deferred growth on your retirement savings.
- Leaving Your Money in Your Old Employer's Plan. This is where you have to determine whether the investment options provided by the mutual fund companies for your old employer's retirement plan are helping or hurting you. A Registered Investment Advisor can provide investment advice and help you understand the advantages and disadvantages of your old employer's plan versus a rollover IRA.
- Doing an Indirect Rollover. Instructing your 401k plan provider to mail a check to you. You have to be extremely careful about the instructions you provide when implementing a rollover or direct trustee to trustee transfer. When doing a direct trustee to trustee transfer, the retirement plan provider will make the check out in the name of the new custodian.
A potential 401k rollover can come at a time when there is a lot going on in your life. Getting professional investment advice about your options when you get laid off or when you retire early can help you avoid costly and irreversible financial mistakes.
To get investment advice from a CFP and IRA rollover specialist near Pittsburgh, contact Bill Griffith, Jr., CFP® of W.E. Griffith & Associates, LLC, a wealth management firm located in Washington, Pennsylvania. He has been providing specialized strategies and services for ensuring long-term financial independence and security for many years. He has written numerous articles about various topics relevant to personal finance, retirement and investment planning.
Return from 401k Rollover to Retirement