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Job Loss or Career Change: The Power of an IRA Rollover

Couple in office talking to financial advisor about IRA Rollover

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Individual Retirement Accounts (IRAs) are a popular tool for retirement planning, and for good reason. They offer tax advantages and can help individuals save for their golden years. However, as people move through their careers, they may find themselves leaving or losing a job. When this happens, they have to make important decisions about what to do with their retirement savings. To stay in control of your money, one option that should be strongly considered is an IRA Rollover. Talk to a Prosperity Financial Advisor today to get the process started. 

What is an IRA Rollover?

An IRA rollover is a process of moving funds from a qualified retirement plan, such as a 401(k), 403(b), or another type of employer-sponsored plan, into an Individual Retirement Account (IRA). 

An IRA rollover can be initiated when someone changes jobs, retires, or loses their job. This process allows individuals to continue to grow their retirement savings in a tax-advantaged account outside of their previous employer’s retirement plan.

What Are the Benefits of an IRA Rollover?

There are several benefits to doing an IRA rollover, including exposure to more investment options, simplifying your retirement planning, and the potential to save money by avoiding taxes and penalties.

Rolling over your retirement savings to an IRA is crucial in order to optimize your retirement funds while moving between jobs or approaching retirement. Rollovers can help you take control of your retirement savings and gain access to a wider range of investment options. It also allows you to continue to grow your savings tax-free until you need to start taking required minimum distributions (RMDs) in retirement.

More Investment Options and Greater Control 

IRAs typically have more investment options and greater control compared to 401(k) plans because they are self-directed. This means that individuals can choose from a wider variety of investments, including stocks, bonds, mutual funds, exchange-traded funds (ETFs), and other types of securities that may not be available in their employer-sponsored retirement plan. 

In contrast, 401(k) plans often have a limited number of investment options, which are pre-selected by the plan sponsor. This lack of investment options can limit an individual’s ability to diversify their portfolio and potentially maximize their returns. Furthermore, in an IRA, individuals have greater control over their investments, allowing them to make decisions based on their personal financial goals and risk tolerance.

Simplify Your Retirement Planning

An IRA rollover can simplify retirement planning by consolidating multiple retirement accounts into one, making it easier to manage and keep track of investments. 

This can reduce paperwork and simplify tax reporting, as well as provide more flexibility in terms of investment options and withdrawal strategies. It also allows individuals to take control of their retirement savings and make decisions based on their personal financial goals and risk tolerance. Overall, an IRA rollover can streamline retirement planning and help individuals achieve their retirement objectives.

Avoid Penalties and Taxes 

An IRA rollover can help individuals avoid penalties and taxes because it is a direct transfer of funds from a qualified retirement plan, such as a 401(k), into an Individual Retirement Account (IRA). The transfer is typically made directly from the retirement plan custodian to the IRA custodian, without the individual ever taking possession of the funds. This is known as a direct rollover, and it is a non-taxable event.

If an individual were to withdraw funds from their qualified retirement plan and not complete a rollover within a specified time frame, typically 60 days, the distribution would be subject to a 10% early withdrawal penalty if they are under the age of 59 1/2, in addition to being subject to federal and state income taxes. By completing a direct rollover, individuals can avoid the early withdrawal penalty and taxes altogether. This allows individuals to continue to grow their retirement savings in a tax-advantaged account outside of their previous employer’s retirement plan.

Closing Thoughts

If you have left or lost a job, are changing careers, or are transitioning into retirement, doing an IRA rollover is an important step in protecting your retirement savings. By moving your funds into an IRA, you can maintain control over your investments, simplify your retirement planning, and potentially save money on fees. 

An IRA rollover is an important financial tool for managing your retirement savings. If you have left or lost a job, consider doing an IRA rollover to take advantage of the benefits it offers. By doing so, you can better control your investments, simplify your retirement planning, and potentially save money on fees. 

At Prosperity Financial Group, we are independent fiduciaries who put your interests above all.

We’re here to help you manage your money so that you are in control, not your previous employers.

No commissions. No fees. No strings attached.

Your IRA rollover is just a phone call away – reach out to us today to get started.

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As your Fiduciary Registered Investment Advisory firm, we’re bound by law to put your interests above our own. We’re committed to maximizing your wealth within the constraints of your values and your life goals.

Our team of qualified and experienced experts is dedicated to building a positive, long-term relationship with you.

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