401(k) / IRA Rollover Services

Mauch Chunk Trust

Mauch Chunk Trust is an independent wealth management firm dedicated to helping clients find solutions to their financial concerns. We understand how daunting financial planning can be in an ever-changing climate, and we are here to help. Our company offers comprehensive investment management and financial strategies tailored directly to you and your goals. We pride ourselves in seeing our clients grow, so our plans will always be customized to your unique needs. Let us help you create a financial strategy that you can trust.

IRA Rollover Services with 401(k)

If you currently have a 401(k) from past employment, it is possible to conduct a 401(k) rollover that transfers money from an old 401(k) to an individual retirement account (IRA). This is a good option for saving money since 401(k) money deposited into the new retirement account is typically not taxed until it is withdrawn. As a result, your savings will continue to grow tax-deferred. Other benefits might include a broader range of investment selections, cheaper investments, or lower account fees.

Choosing Which Type of IRA To Open

Choosing the right type of IRA account to rollover your 401(k) to will determine the taxes you pay on your rolled amount. It is essential to keep in mind their differences so that you can make a decision that best suits your financial plans.

Traditional IRA

Up to a certain amount, your investment becomes tax-deductible when rolling over to a traditional IRA. However, tax deferral no longer applies when it is time to withdraw the funds. You must begin to withdraw at age 72 due to required minimum distributions (RMDs), regardless of whether or not you are still working. If you are currently in a high tax bracket, choosing a traditional IRA might be beneficial because it remains tax-free until it is withdrawn when there is a possibility that you will be in a lower tax-bracket.

Roth IRA

When rolling over to a Roth IRA, the amount will be immediately regarded as taxable income. However, after five years of remaining in the Roth IRA and following its requirements, all of your funds become tax-free. There are also no lifetime distribution requirements for Roth IRAs, which means you can leave the funds in the account indefinitely as they grow tax-free. The left-over funds can then be passed down to heirs, who must withdraw from the account within ten years following your death. If you are in a modest tax bracket but have the potential to enter a higher tax bracket in the future, choosing a Roth IRA may be beneficial because the current cost of taxes might be small compared to the tax savings in upcoming years.

If your 401(k) is currently a Roth Account

In the event that your 401(k) was already a Roth account, it can only be rolled over to a Roth IRA. Rolling a Roth 401(k) to a Roth IRA means that you will not pay taxes on any rollover.

Choosing the Best Way to Initiate Your Rollover

Direct vs. Indirect Rollover

In a direct rollover, money is transferred electronically from one account to another or deposited via check written by a plan administrator. In an indirect rollover, the funds are deposited to you rather than your IRA account. From there, you must redeposit the funds into your chosen IRA. You have 60-days to conduct the re-deposit after receiving the funds. Some people prefer an indirect rollover when they want to take a 60-day loan from their retirement account. However, if you fail to meet the 60-day deadline, you will be subject to withholding taxes and other penalties. Most often, the direct rollover is recommended to avoid missed deadlines and their consequences.

Key Takeaways

Rolling your 401(k) over to an IRA account is an excellent option for consolidating your retirement savings. However, it is crucial to understand the ins and outs of IRA rollovers in order to be sure that your investments are appropriately aligned with your financial situation. Being conscious of your current and future tax bracket is crucial when deciding between a traditional IRA and a Roth IRA. It is also important to weigh the risks and rewards of direct vs. indirect rollovers to avoid incurring fees. Utilizing financial planners will help take the stress out of strategizing. Our wealth management professionals can help you allocate your 401(k) into a retirement plan that fits your future financial goals while complementing your current financial situation. With the help of the professionals at Mauch Chunk Trust, you can be sure that you get the most out of your 401(k).