If you’ve switched jobs, are over 59 ½ or retired recently, you may be wondering what to do with the money left in your 401(k) or another retirement plan from the previous job.
The good news is that money is yours to keep (minus any of the company’s contributions that aren’t vested). Most commonly, you will want to move it to another account of your choice. This blog post will walk you through your options, how to request a rollover and how you can get help with this process.
What Are My Retirement Plan Options?
While you may be familiar with the term 401(k) as an option typically offered through your workplace, there are other options for creating a retirement plan. Some of the most common include:
- – 401(k) plans – As we mentioned earlier, these are most commonly found through a workplace. Employers often match employee contributions to these plans. The amounts in these plans are includible in your taxable income at retirement.
- – 403(b) plans – These plans are similar to 401(k) plans, but are offered by institutions like public schools and some nonprofit organizations.
- – Traditional Individual Retirement Arrangements (IRAs) – An IRA is a retirement plan you set up for yourself, independent of any plan you may already have through work. These are tax-deductible when you make a contribution, but taxed when you make withdrawals in retirement.
- – Roth IRAs – Similar to a regular IRA, Roth IRAs allow you to save for retirement with money that has already been taxed. This prevents your savings from being taxed again when it’s time to withdraw.
If you’ve left or retired from a job and want to roll your contributions over, you’ll likely choose a traditional or Roth IRA. But because other options are available, talk to a financial professional who can help choose the right plan for you.
Comparing Different Retirement Plans
The retirement plan you choose will depend on you – your age, the amount of money you make and when you hope to retire, among other things. For a set of quick guidelines on the most common options, traditional and Roth IRAs, refer to the list below.
- Contributions can be made until age 70.5.
- Contributions may be deducted from your taxes but are taxed when taken out at retirement.
- You must begin withdrawing money by April first the year after you turn 70.5, and by Dec. 31 of years following.
- Contributions can be made at any age as long as you meet the requirements.
- Contributions are already taxed. This prevents your savings from being taxed again when it’s time to withdraw.
- Deductions are not required by a certain date if you’re the original owner.
The main difference between the two plans is when your contributions are taxed. Talk to your financial advisor for more information on the differences between these plans.
How Much Money Can I Contribute to a Retirement Plan?
Different retirement plans have different contribution limits per year.
For traditional and Roth IRAs in 2019, your total contributions to all of these plans cannot exceed $6,000 per year (or $7,000 if you’re above age 50). This limit doesn’t apply to any amount you roll over from another account.
Other restrictions may apply depending on the filing status you and your spouse have. And if you contribute more than the limit, that amount will be subject to tax as long as it’s in the account – so make sure you understand the guidelines before you make a contribution.
How to Roll Over a Retirement Plan
While it’s not automatically required that you roll your account into a new one, there are benefits to doing so depending on your specific situation.
Where Can I Get Help with My Retirement Plan?
Navigating retirement plans can be confusing on your own, but a good financial advisor can help.
At Minster Bank, our Private Wealth Management team helps people plan for the future every day by creating a plan that’s right for them.
“We believe that planning is the most important part of helping our customers meet their goals,” said Steve Eiting, manager of the Private Wealth Management team.
For help creating your plan for success, contact a Private Wealth Management advisor today.
Securities and Investment Products offered through the Minster Bank Private Wealth Management Group: * Not FDIC insured * May lose value * Not financial institution guaranteed * Not a deposit * Not insured by any federal government agency.