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Moving your retirement funds

Posted October 16, 2013 in Advice Column

There have been many changes since some of you left your last job. But you may have left something important at your former workplace: a retirement savings account. If you participated in an employer-sponsored retirement account, a 401(k) or a pension fund at your previous job, you need to think about what to do with the funds. Here are some options to consider. If you are not able to let the account stay at your former employer (which many of you have realized recently ) here are a few options to put that account to work for you.

•    Check the fund performance you’re seeking and that the account fees are acceptable to you. Roll over the money to an IRA. This option allows your funds to compound tax-deferred and may give you more investment options than the 401(k) plans with either your previous or current employer. If you choose a traditional IRA, you won’t pay any taxes when you roll over the money. If you roll money into a Roth IRA from a traditional 401(k), you’ll be taxed on the money going into the account, but pay no federal income taxes when you withdraw the money (after you’re age 59½ and have had the account open for five or more years). Money from a Roth 401(k) can be rolled into a Roth IRA tax-free.

•    Cash out the account. Cashing out a retirement plan early typically means you’ll pay federal and often state taxes and, if you are younger than age 59½, you may have to pay a penalty tax and sacrifice a substantial portion of your savings.

Because there are many considerations in deciding what, if anything, to do with your retirement account, talk with a financial or tax professional before you make your move. If you’ll be moving your retirement account to your new employer’s plan, you’ll also need to talk to the plan administrator to discuss your options. There have been many changes to some local retirement accounts recently.

Please give us a call with any questions.

Information provided by Jerry Goebel, State Farm Insurance, 1209 Superior St., Webster City. For more information, call 515-832-4066.

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