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401(k) Transition Guide in 5 Steps

Keep it. Let it ride. Roll it over.

We can assist you with a variety of wealth management needs, including 401(k) transition assistance.

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1) Mind the Deadlines

When you leave an employer, their 401(k) plan will usually send you information on your distribution options and the potential deadline for indicating what you want to do with your money. If you miss that deadline, a decision will be made for you.

In addition, if your old 401(k) balance is paid directly to you, the IRS requires that you roll it over to an Individual Retirement Account (IRA) or a new 401(k) plan within 60 days to avoid a penalty.

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2) Choose Between Traditional and Roth Options

The key difference is when your retirement savings are taxed.

With a Traditional IRA or 401(k):

  • Plan contributions, including rollovers, are exempt from taxes and grow tax-free until withdrawal.
  • Upon qualified withdrawal, contributions and earnings are taxed as regular income.

With a ROTH IRA or 401(k):

  • Plan contributions are made after-tax income – so a rollover from a non-Roth 401(k) to a Roth plan would be taxed when you roll it over.
  • Qualified withdrawals in retirement, including all earnings, are tax-free and subject to plan rules.
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3) Request a Direct Rollover

In a direct rollover, your money moves straight from your old 401(k) provider to your new IRA or 401(k) account without you ever taking possession of the funds.
This avoids the mandatory 20% tax withholding that applies if your rollover check is made payable to you.

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4) Setup the Account Transfer

Your old and new retirement plan providers will have specific distribution procedures, such as how a distribution check should be made. Follow these procedures to avoid complications, and consult your financial professional located at your credit union if you’d like help.

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5) Select Your Investments

Once you’ve set up your new account, you’ll need to select your investments. Your local Magnifi Wealth Management financial professional can help you better understand your options and choose investments that match your goals and risk tolerance.

Note: Some employer 401(k)s do not offer a Roth option, while others may allow you to combine Traditional and Roth accounts.

This material was created for educational and informational purposes only and is not intended as tax or investment advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

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Here to Help: Local Financial Advisors

Get financial guidance from experienced local professionals. Magnifi Wealth Management Financial Representatives can assist you with a variety of wealth management needs, including 401(k) rollover services.

Recently, we have had several questions about 401(k) accounts:

  • I’ve left my job. What are my options?
  • Can I pull the money out?
  • How does a rollover work?
  • I have a few old 401(k)s with former employers. Can I consolidate them?
  • What’s the difference between Traditional and Roth 401(k) accounts?

It is our job, as financial advisors, to answer all your questions and provide personalized advice based on your unique financial situation. We offer individualized service tailored to your specific needs and goals. Magnifi Wealth Management has all the experience and knowledge of national investment firms but are dedicated to serving the needs of Minnesota.

Above all, we want to make the process easy for you. Our team of advisors is available to meet with you at whichever is most convenient: virtual meeting, over the phone, or at any Magnifi Financial location. 

Together, we’ll build a road map for your financial future. Set up a no-cost, no-obligation financial consultation today!

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