401k Rollover Questions to Ask

<h1>401k Rollover Questions to Ask</h1>Author: <a title="Newretirement.com" href="http://www.articlesbase.com/authors/newretirement.com/210750.htm">Newretirement.com</a> <h2>A Step by Step Guide to Your 401k Rollover or Retirement Consolidation – Understand Your Rollover Choices</h2> Rolling over your retirement assets into an IRA at retirement involves a lot more than paperwork! There are innumerable criteria and strategies to consider. Here we take you step by step through the various choices you will need to make when allocating your retirement assets. While many people do choose to conduct their retirement rollovers on their own, you should at least consider working with a qualified financial advisor. Their expertise could help you navigate these important decisions. <h2>Rollover Choice One – Figure Out Your Retirement Needs and How You Should Use Your Retirement Funds</h2> Retirement planning is not easy. It is a budgeting process for the rest of your life for which you must account for many unknowns like inflation, stock fluctuations, changes in real estate prices, personal health costs, taxes and your own longevity. When deciding what to do with your 401k, the most important consideration is your retirement plan and how it may need bolstering. This is a big and important question and many retirees choose to work with a Financial Planner who can help them create a strong plan. Depending on your situation, you may wish to rollover your 401k into a financial vehicle that will enable you to: <ol> <li>Guarantee Lifetime Income: Most financial experts agree that guaranteeing adequate income for the rest of your life is probably the most important criteria when considering retirement and how to invest your retirement funds.</li> </ol> Guaranteed lifetime income can come from Social Security, a pension, interest or dividends, a lifetime annuity or a combination of these sources. Your Social Security and most pension benefits are guaranteed for life. However, if there is a shortfall between this income and your actual expenses, then you will probably want to choose to roll over your funds into an IRA that offers a financial product that will guarantee adequate income to make up that shortfall. There are at least three common ways to insure lifetime income with your 401k rollover: <ul> <li>Earn Interest and/or Dividends: If you have sizable savings to rollover, you will want to carefully consider how lifetime income might be achieved with interest and dividends earned from your capital. However, you will want to carefully consider your investment options so as not to put your principal at risk.</li> <li>Purchase an Annuity: A lifetime annuity can guarantee lifetime income and many annuities are available with favorable tax treatment for 401k rollovers.</li> <li>Systematic Drawdowns: Taking scheduled withdrawals from your IRA and the interest earned on your IRA is probably the most common retirement income strategy. This can be a particularly good strategy if you also purchase a lifetime annuity that would start when you finish drawing down your assets – guaranteeing your income even if your longevity is longer than you expect.</li> </ul> If you are unsure whether or not you have adequate assets for retirement, use theNewRetirement Retirement Planning Calculator to find out, or consult with a Financial Advisor. <ol> <li>Provide Adequate Insurance: The second most important issue with retirement is having adequate insurance. You can develop an investment strategy for your rollover IRAs funds to help cover Long Term Care and other medical costs. Depending on the distribution rules for your account, you could also open a Health Savings Account which can provide favorable tax status for your funds. A professional financial advisor who specializes in retirement can help you with this process.</li> <li>Maximize Estate Planning: If you have managed to guarantee adequate lifetime income and have sufficient insurance, then you will want to consider rolling over your 401k into an IRA with a firm that provides financial tools and services for efficient estate planning.</li> <li>Fund Your Desired Retirement Lifestyle: While you must be diligently responsible with your retirement planning, most retirees also have a few fun ideas about how they would like to spend their time away from work. Whether reading with grandchildren, an African Safari or a vacation home – your retirement interests should also be considered when allocating your retirement funds.</li> <li>Combination of Goals and Strategies: Like anyone in any situation, most retirees will want and even need it all – guaranteed lifetime income, adequate insurance, an estate to leave behind and a satisfying life without work.</li> </ol> The trick is in choosing the right financial products and strategies to achieve your retirement financial needs. <h2>Rollover Choice Two – Decide to Rollover or Keep Funds in Company Plan or with Existing Institution</h2> Once you have a better idea of how you need to use your savings for retirement, you can better decide if you require a rollover. Rolling Over from a Company Plan: Some 401k plans require that you rollover the funds at retirement. Others do not. However, if your retirement funds are in a company plan, most financial planners advise that you rollover. The advantages of rolling over your 401k into an IRA at retirement include: <ul> <li>Rollovers provide more flexibility in how you can allocate and use the money. You can rollover your funds into a vehicle suited to your particular situation.</li> <li>Security against your employer going out of business, merging with another company or other event that could potentially impact your 401k funds.</li> <li>More control over when and how you can withdraw money and manage your account. (Employer sponsored 401ks often have limits on when you can do this.)</li> <li>Ability to consolidate all of your 401k accounts into one IRA. Many retirees have 401ks at various companies. This money will be easier to manage in retirement if you consolidate it in one place – even if it is invested in different types of financial products.</li> <li>Puts you in charge of your account. Even if you like your current 401k plan, there are no guarantees that your employer will stick with that platform.</li> </ul> While there is no requirement to rollover your retirement funds, most believe it to be a good idea. Rolling Over from Existing Financial Institution: If you have already transferred your funds out of your company plan or if you have various accounts with different institutions, you may want to consolidate with a single financial institution that offers the type of investment vehicles and financial advice that you really need in retirement. Consolidating your retirement assets can be a particularly good idea if you are interested in working with a <a href="http://www.newretirement.com/Services/Professional_Financial_Advisors.aspx">Financial Advisor</a> who can holistically assess your retirement situation and allocate your assets to your best advantage. <h2>Rollover Choice Three – Choose Between an IRA and a Roth IRA</h2> There are two main types of 401k rollover accounts -- IRA and Roth IRA. The IRA is also sometimes referred to as a traditional IRA. The main differences between the two accounts are related to taxes and the rules surrounding withdrawals. Continue here for a complete <a href="http://www.newretirement.com/Services/Rollover_Comparison.aspx">comparison of IRAs and Roth IRAs as well as information about other types of IRAs</a>. <h2>Rollover Choice Four: Decide How Much Rollover Advice and Service You Need and Understand Fees and Minimum Balances</h2> When opening an IRA at retirement, there are two buckets of fees and costs that you will want to consider: <ul> <li>IRA and Account Maintenance Fees: There can be fees associated with opening and maintaining an IRA. Before opening a Rollover IRA, be sure you understand any setup fees, maintenance fees, trading commissions and minimum balance requirements.</li> </ul> While you may automatically think that you would like a “no fee IRA,” you are actually likely to find significant costs associated with them when you read the fine print. <ul> <li>Financial Planning Fees: There are two main routes to opening an IRA. You can be self directed or you can work with a Financial Advisor.</li> </ul> Financial advising fees will be dependent on the complexity of your finances. Many retirees find that the additional advice and service a financial planner can provide will more than cover the fees. Given the myriad investment choices available to you and the complications implicit in retirement planning, professional advice can be a good idea. After all, if you make a bad decision with your retirement nest egg, how will you deal with the consequences? Here are a few tips for choosing the right advisor. Make sure that the advisor you choose: <ul> <li>Has a holistic approach to planning – that they look at your goals and create a plan that maximizes the potential of all of your various assets. A holistic approach to planning would take into account your 401k assets as well as your home equity, other savings, pensions and more – enabling these assets to work with each other to fulfill your retirement goals.</li> <li>Focuses on retirement – not “retirement planning.” Using money in retirement is totally different than saving money for retirement. In retirement, you need to use your assets not add to them. It is very important that your advisor has this type of experience and can address everything from guaranteeing lifetime income to estate planning.</li> <li>Provides access to the widest variety of investment choices and vehicles. Ideally your advisor can sell financial products from any provider.</li> <li>Offers full disclosure on all fee and commission payments they receive.</li> </ul> <h2>Rollover Choice Five -- Find a Financial Institution that Offers Qualified Investments that Suit Your Retirement Goals</h2> Depending on your retirement goal – guaranteed income, adequate insurance, estate planning or a combination of these objectives – you will want to choose an investment strategy for your 401k rollover. The good news is that you have an ever growing number of tax friendly – “qualified” options. These options include: <ul> <li>CDs</li> <li>Bonds and Bond Ladders</li> <li>Stocks</li> <li>Dividend Yielding Stocks</li> <li>Exchange Traded Funds (ETFs)</li> <li>Money Market Accounts</li> <li>Mutual Funds</li> <li>Annuities</li> <li>Insurance</li> <li>Managed Accounts</li> <li>Hybrid Products – offering benefits of many of the above products</li> </ul> Many advisors are pointing people toward hybrid products. These prepackaged combinations of annuities, insurance and investments are an interesting way to cover your retirement plan bases. <h2>Rollover Choice Six – Respect the Distribution Rules!</h2> The final step when conducting a Rollover is to respect the Distribution rules. <ul> <li>Respect Distribution Rules with Rollover: When rolling over 401k funds or consolidating IRAs, it is very important that you follow the distribution rules. In most cases you should probably do a Direct Rollover. With a Direct Rollover, a check for your retirement funds is made payable to the new IRA custodian or financial institution. This is the preferred way to conduct a rollover since there is no chance of there being tax consequences as is possible with an Indirect Rollover.</li> </ul> With an Indirect Rollover the check for your funds is made payable to you. And you must forward the money yourself within the allotted time period. <ul> <li>Respect the Plan’s Distribution Rules for Withdrawals: This is particularly important if you rollover your funds into a Traditional IRA. Withdrawals on a Traditional IRA (also known as distributions) can begin at age 59 1/2 and are mandatory by 70 1/2. (Withdrawals before age 59 and a half are usually subject to a 10 percent penalty.)</li> </ul> With a Roth IRA, withdrawals may be taken at any time without penalty and there is no mandatory distribution age. <h2>Find the Best Rollover IRA for You</h2> Let NewRetirement help you find an institution offering a Rollover IRA that suits your retirement.<a href="http://www.newretirement.com/Services/Find_Rollover_3_Steps.aspx">Continue here to Find the Best Rollover IRA for you.</a>About the Author: <a href="http://www.newretirement.com">NewRetirement</a> is a website who's goal is to provide unbiased and comprehensive coverage on all financial questions facing retirees today. Please visit us to answer your retirement questions and ease your retirement worries.Article Source: <a href="http://www.articlesbase.com/">ArticlesBase.com</a> - <a href="http://www.articlesbase.com/personal-finance-articles/401k-rollover-questions-to-ask-1125237.html" title="401k Rollover Questions to Ask">401k Rollover Questions to Ask</a>

A Step by Step Guide to Your 401k Rollover or Retirement Consolidation – Understand Your Rollover Choices

Rolling over your retirement assets into an IRA at retirement involves a lot more than paperwork! There are innumerable criteria and strategies to consider.

Here we take you step by step through the various choices you will need to make when allocating your retirement assets. While many people do choose to conduct their retirement rollovers on their own, you should at least consider working with a qualified financial advisor. Their expertise could help you navigate these important decisions.

Rollover Choice One – Figure Out Your Retirement Needs and How You Should Use Your Retirement Funds

Retirement planning is not easy. It is a budgeting process for the rest of your life for which you must account for many unknowns like inflation, stock fluctuations, changes in real estate prices, personal health costs, taxes and your own longevity.

When deciding what to do with your 401k, the most important consideration is your retirement plan and how it may need bolstering. This is a big and important question and many retirees choose to work with a Financial Planner who can help them create a strong plan.

Depending on your situation, you may wish to rollover your 401k into a financial vehicle that will enable you to:

Guarantee Lifetime Income: Most financial experts agree that guaranteeing adequate income for the rest of your life is probably the most important criteria when considering retirement and how to invest your retirement funds.

Guaranteed lifetime income can come from Social Security, a pension, interest or dividends, a lifetime annuity or a combination of these sources.

Your Social Security and most pension benefits are guaranteed for life. However, if there is a shortfall between this income and your actual expenses, then you will probably want to choose to roll over your funds into an IRA that offers a financial product that will guarantee adequate income to make up that shortfall. There are at least three common ways to insure lifetime income with your 401k rollover:

Earn Interest and/or Dividends: If you have sizable savings to rollover, you will want to carefully consider how lifetime income might be achieved with interest and dividends earned from your capital. However, you will want to carefully consider your investment options so as not to put your principal at risk.
Purchase an Annuity: A lifetime annuity can guarantee lifetime income and many annuities are available with favorable tax treatment for 401k rollovers.
Systematic Drawdowns: Taking scheduled withdrawals from your IRA and the interest earned on your IRA is probably the most common retirement income strategy. This can be a particularly good strategy if you also purchase a lifetime annuity that would start when you finish drawing down your assets – guaranteeing your income even if your longevity is longer than you expect.

If you are unsure whether or not you have adequate assets for retirement, use theNewRetirement Retirement Planning Calculator to find out, or consult with a Financial Advisor.

Provide Adequate Insurance: The second most important issue with retirement is having adequate insurance. You can develop an investment strategy for your rollover IRAs funds to help cover Long Term Care and other medical costs. Depending on the distribution rules for your account, you could also open a Health Savings Account which can provide favorable tax status for your funds. A professional financial advisor who specializes in retirement can help you with this process.
Maximize Estate Planning: If you have managed to guarantee adequate lifetime income and have sufficient insurance, then you will want to consider rolling over your 401k into an IRA with a firm that provides financial tools and services for efficient estate planning.
Fund Your Desired Retirement Lifestyle: While you must be diligently responsible with your retirement planning, most retirees also have a few fun ideas about how they would like to spend their time away from work. Whether reading with grandchildren, an African Safari or a vacation home – your retirement interests should also be considered when allocating your retirement funds.
Combination of Goals and Strategies: Like anyone in any situation, most retirees will want and even need it all – guaranteed lifetime income, adequate insurance, an estate to leave behind and a satisfying life without work.

The trick is in choosing the right financial products and strategies to achieve your retirement financial needs.

Rollover Choice Two – Decide to Rollover or Keep Funds in Company Plan or with Existing Institution

Once you have a better idea of how you need to use your savings for retirement, you can better decide if you require a rollover.

Rolling Over from a Company Plan: Some 401k plans require that you rollover the funds at retirement. Others do not. However, if your retirement funds are in a company plan, most financial planners advise that you rollover.

The advantages of rolling over your 401k into an IRA at retirement include:

Rollovers provide more flexibility in how you can allocate and use the money. You can rollover your funds into a vehicle suited to your particular situation.
Security against your employer going out of business, merging with another company or other event that could potentially impact your 401k funds.
More control over when and how you can withdraw money and manage your account. (Employer sponsored 401ks often have limits on when you can do this.)
Ability to consolidate all of your 401k accounts into one IRA. Many retirees have 401ks at various companies. This money will be easier to manage in retirement if you consolidate it in one place – even if it is invested in different types of financial products.
Puts you in charge of your account. Even if you like your current 401k plan, there are no guarantees that your employer will stick with that platform.

While there is no requirement to rollover your retirement funds, most believe it to be a good idea.

Rolling Over from Existing Financial Institution: If you have already transferred your funds out of your company plan or if you have various accounts with different institutions, you may want to consolidate with a single financial institution that offers the type of investment vehicles and financial advice that you really need in retirement.

Consolidating your retirement assets can be a particularly good idea if you are interested in working with a Financial Advisor who can holistically assess your retirement situation and allocate your assets to your best advantage.

Rollover Choice Three – Choose Between an IRA and a Roth IRA

There are two main types of 401k rollover accounts -- IRA and Roth IRA. The IRA is also sometimes referred to as a traditional IRA.

The main differences between the two accounts are related to taxes and the rules surrounding withdrawals. Continue here for a complete comparison of IRAs and Roth IRAs as well as information about other types of IRAs.

Rollover Choice Four: Decide How Much Rollover Advice and Service You Need and Understand Fees and Minimum Balances

When opening an IRA at retirement, there are two buckets of fees and costs that you will want to consider:

IRA and Account Maintenance Fees: There can be fees associated with opening and maintaining an IRA. Before opening a Rollover IRA, be sure you understand any setup fees, maintenance fees, trading commissions and minimum balance requirements.

While you may automatically think that you would like a “no fee IRA,” you are actually likely to find significant costs associated with them when you read the fine print.

Financial Planning Fees: There are two main routes to opening an IRA. You can be self directed or you can work with a Financial Advisor.

Financial advising fees will be dependent on the complexity of your finances. Many retirees find that the additional advice and service a financial planner can provide will more than cover the fees.

Given the myriad investment choices available to you and the complications implicit in retirement planning, professional advice can be a good idea.

After all, if you make a bad decision with your retirement nest egg, how will you deal with the consequences?

Here are a few tips for choosing the right advisor. Make sure that the advisor you choose:

Has a holistic approach to planning – that they look at your goals and create a plan that maximizes the potential of all of your various assets. A holistic approach to planning would take into account your 401k assets as well as your home equity, other savings, pensions and more – enabling these assets to work with each other to fulfill your retirement goals.
Focuses on retirement – not “retirement planning.” Using money in retirement is totally different than saving money for retirement. In retirement, you need to use your assets not add to them. It is very important that your advisor has this type of experience and can address everything from guaranteeing lifetime income to estate planning.
Provides access to the widest variety of investment choices and vehicles. Ideally your advisor can sell financial products from any provider.
Offers full disclosure on all fee and commission payments they receive.

Rollover Choice Five -- Find a Financial Institution that Offers Qualified Investments that Suit Your Retirement Goals

Depending on your retirement goal – guaranteed income, adequate insurance, estate planning or a combination of these objectives – you will want to choose an investment strategy for your 401k rollover.

The good news is that you have an ever growing number of tax friendly – “qualified” options. These options include:

CDs
Bonds and Bond Ladders
Stocks
Dividend Yielding Stocks
Exchange Traded Funds (ETFs)
Money Market Accounts
Mutual Funds
Annuities
Insurance
Managed Accounts
Hybrid Products – offering benefits of many of the above products

Many advisors are pointing people toward hybrid products. These prepackaged combinations of annuities, insurance and investments are an interesting way to cover your retirement plan bases.

Rollover Choice Six – Respect the Distribution Rules!

The final step when conducting a Rollover is to respect the Distribution rules.

Respect Distribution Rules with Rollover: When rolling over 401k funds or consolidating IRAs, it is very important that you follow the distribution rules. In most cases you should probably do a Direct Rollover. With a Direct Rollover, a check for your retirement funds is made payable to the new IRA custodian or financial institution. This is the preferred way to conduct a rollover since there is no chance of there being tax consequences as is possible with an Indirect Rollover.

With an Indirect Rollover the check for your funds is made payable to you. And you must forward the money yourself within the allotted time period.

Respect the Plan’s Distribution Rules for Withdrawals: This is particularly important if you rollover your funds into a Traditional IRA. Withdrawals on a Traditional IRA (also known as distributions) can begin at age 59 1/2 and are mandatory by 70 1/2. (Withdrawals before age 59 and a half are usually subject to a 10 percent penalty.)

With a Roth IRA, withdrawals may be taken at any time without penalty and there is no mandatory distribution age.

Find the Best Rollover IRA for You

Let NewRetirement help you find an institution offering a Rollover IRA that suits your retirement.Continue here to Find the Best Rollover IRA for you.

NewRetirement is a website who's goal is to provide unbiased and comprehensive coverage on all financial questions facing retirees today. Please visit us to answer your retirement questions and ease your retirement worries.

Rate this Article:

0 / 5 stars - 0 vote(s)

Re-Publish

Article Source: http://www.articlesbase.com/personal-finance-articles/401k-rollover-questions-to-ask-1125237.html

Article Tags: 401k, Retirement Funds, Rollover, Rollover Choice, Lifetime Income Distribution Rules, 401k Rollover Questions, Rollover Questions

Related Videos
Related Articles
Ask / Related Q&A

Play

How to Understand the Self Directed Solo 401k

Play

How to Understand Self Directed IRA/401k: Unrestricted Choices

Play

How to Understand Your Solo 401k Eligibility

Play

Savvy Rules for 401k Investing

Play

What is a Roth 401k

Latest Personal Finance Articles
More from Newretirement.com

Money Stretching Secrets Of Rags To Riches People - 3 Most Frequently Asked Questions

By: Roy Primm | 31/12/2009
Discover the secret world of how average ( and below average) people are rising from rags to riches in the midst of this recession ... without having special talents, connections or luck. Use these tips and ideas to help overcome the financial obstacles you're facing.

Chapter 13 Payments and Personal Bankruptcy

By: Simon Volkov | 30/12/2009
Chapter 13 payments are used when debt is restructured through bankruptcy. Debtors must abide by the repayment plan for two to five years. During the restructured debt period, debtors are prohibited from incurring new debt unless approved through the court.

thousand dollars personal finance, six months thousand dollar, five thous and financial health, difficult financial, how to save money

By: John Moore | 30/12/2009
During difficult financial times, it is important to create a sense of security when it comes to our financial health. This means attempting to put away a cushion of cash in case times get rough.

Cheap Groceries For A Tight Budget

By: John Arbor | 30/12/2009
There are many ways to save money on groceries. Knowing just a few of these tips can save a good amount of money each time you go shopping for cheap groceries

How Safe Are Your Possessions?

By: Andrew Regan | 30/12/2009
Keeping your possessions safe from harm is something we should all do on a daily basis. How efficiently do you manage to do this?

How Cutting Small Costs Can Make a Big Difference

By: Adam Singleton | 30/12/2009
When attempting to save money, many people cut larger expenditures out of their budget. However, it’s often the smaller, everyday expenses that ultimately add up.

Tips for Saving on Holiday Calls

By: Andrew Regan | 30/12/2009
The holidays are a time for connecting with family members and friends all over the world, often via telephone, but that doesn’t mean you have to rack up a massive phone bill.

Payday Loan Lenders Only

By: Devin Dozier | 30/12/2009
As economic times become harder, so does the ability for people to pay loans. Presently, things have continued to rise in relation to the prices that are associated with living as well as other costs related to a person's living expenses. Many times, people can find some ease that comes along with payday loan lenders only, however there are other expenses that come along with this as well.

Top 14 Reasons to be A Working Senior

By: Newretirement.com | 17/08/2009 | Careers
Forget early retirement, the trends all point toward working well after the traditional retirement age of 65 – reversing earlier trends of early retirement. In fact, an AARP study reported that almost half of their respondents planned to be working seniors into their 70s or beyond. The financial reasons for working after retirement are significant. But, many people also find jobs in retirement to be a source of fun and vitality. Explore the varied reasons to work below.

Pros and Cons of Retirement Savings Plans for Small Businesses

By: Newretirement.com | 17/08/2009 | Personal Finance
There are many benefits and downsides to owning your own business – flexible retirement planning can be a big benefit. However, too many business owners neglect this financial planning task for the more pressing day to day needs of their business.

Advantages and Disadvantages of Reverse Mortgages

By: Newretirement.com | 13/08/2009 | Personal Finance
A reverse mortgage might or might not be right for you. Here is a comprehensive guide to reverse mortgage pitfalls and benefits.

The Pros and Cons of Annuities

By: Newretirement.com | 13/08/2009 | Personal Finance
A detailed list of the pros and cons of annuities. This list provides all the details so that you can make a prudent decision.

Advantages and Disadvantages of the Most Popular Home Equity Tapping Solutions

By: Newretirement.com | 13/08/2009 | Personal Finance
Comparison of the Pros and Cons of Reverse Mortgages, Home Equity Loans and Downsizing. After reading this article you will be able to determine what choice is best for you to ensure you maintain suitable finances in retirement.