Prior to 2008, employees were not entitled to roll their 401(k) into a self-directed IRA until they retired or left service. The federal government changed those rules after the stock market crash of 2008 because so many workers who were on the cusp of retirement were forced to continue working to make up for the substantial losses they incurred.
So the question is, if you are at least 59 1/2, why haven’t you rolled your 401(k) into a self-directed IRA? Here’s what you should consider.
No Adverse Effects to Your Existing 401(k) or Future Contribuitions
A rollover simply transfers your existing 401(k) funds into a self-directed IRA. This is a tax-free transaction. Your existing 401(k) account remains open for future contributions and employer matching. We would be happy to provide guidance as to how you should invest future contributions within your employer sponsored plan.
Lock in Gains and Reduces Risk
The S&P 500 has risen 1890 points since March of 2009. That is over a 200% gain, meaning if properly managedyour 401(k), it could have doubled twice. Why not capture those gains by rolling your 401(k) into a self-directed IRA and reallocating your funds in a manner that may better reflect your risk tolerance as you approach retirement.
In August 2013, the Department of Labor published a paper regarding the amount of fees charged within a 401(k) plan. The paper pointed out the numerous hidden fees within 401(k)s that most consumers are unaware of. You can read the paper here. By rolling to a self-directed IRA, you can chose investment options that may be able to reduce the total amount of fees you are paying.
Unlimited Investment Options
Most 401(k) plans limit investment options to just mutual funds. When you roll to a self-directed IRA, you open up an unlimited amount of investment options. This includes individual stocks, bonds, and ETFs. These additional investment options may help you mitigate stock market risk in the future and help you retire on your own terms.
Let Montini & Farrah Tax Advisory Group help you rollover your 401(k) today. Call our office at (480) 428-8005. You can also CLICK THIS LINK to request a no-cost consultation.
Written by Marc Montini, Managing Partner, Montini & Farrah Tax Advisory Group. As a licensed fiducary, Marc Montini brings a holistic approach to retirement planning. With a emphasis on tax planning, income planning, Roth IRA conversions, tactical asset management, and estate planning, Marc Montini and Montini & Farrah Tax Advisory Group can help you achieve your retirement dreams.