401(K) Rollover Options
Various options merit consideration, including a 401(k) rollover, which entails transferring your current balance to your new employer’s 401(k) plan without facing tax or penalty charges.
Another possibility is to affect a rollover of your 401(k) funds into an Individual Retirement Account (IRA), offering broader investment choices and increased income flexibility in retirement.
Each option carries distinct costs and expenses, along with its own set of advantages and disadvantages regarding moving or rolling over a 401(k) plan. It’s important to note that there are no assurances of investment success.
Leave It Untouched
Owing to a lack of comprehension, the default decision for many individuals is to leave their 401(k) untouched. Each 401(k) plan is overseen by the sponsoring company and the plan’s administrator, thereby determining factors such as available investment options.
Rollover Option
If your new employer provides a 401(k) plan and you qualify for enrolment, it’s straightforward to transfer your previous 401(k) balance.
Withdraw Income
Once you reach the age of 59½, you’re eligible to commence receiving qualified distributions from any 401(k) account. With a traditional 401(k), any income withdrawn will be US-taxable income and counted towards your annual tax allowance.
Transfer to IRA
Transferring your 401(k) to an Individual Retirement Account (IRA) grants you access to a broader array of investment options, often at reduced costs. Additionally, an IRA offers increased flexibility for withdrawals, allowing you to decide when and how much to withdraw throughout your retirement.
401(k) and IRAs - Frequently Asked Questions
Given that the process primarily involves digital transfer with minimal paperwork, there are no direct costs. However, our management services incur fees in the form of an annual charge deducted from your account on a quarterly basis, which may impact the overall performance of your account.
Once we have identified your 401(k) and obtained all necessary details, the process usually takes between 2 to 3 weeks to finalise.
There is no mandatory minimum contribution period for a 401(k). However, to optimise your 401(k) returns, there are recommended contribution amounts and contribution limitations.
As with any investment, the value of your 401(k) can fluctuate. Instances have occurred where 401(k) plans heavily reliant on the stock market have experienced substantial losses. To minimise the impact of market swings, it’s essential to diversify your investments across various asset classes rather than concentrating them in one area.
Your initial step should involve reaching out to your former employer or plan administrator directly. However, if you lack their contact information or they’ve undergone a change in corporate structure, this may not be feasible. In such instances, you’ll need to search for an old statement to obtain contact details of the plan administrator. Alternatively, you can use the National Registry of Unclaimed Retirement Benefits for a complimentary search of any retirement plan balances under your name.
What can we do for you?
- Risk-appropriate portfolio advice and management
- We can advise people who are now living outside the US
We always recommend that you speak with a US-qualified financial adviser when dealing with various pension schemes and taxes.
Our advisers will work with you to put a retirement plan together and ensure that your pensions are invested well and that there are no tax implications. Managing your various pensions and investments can be complicated. At Hoxton Capital Management USA LLC, we know the ins and outs of managing US pension accounts and have the time and knowledge to put together the right strategy for you. Talk to us now to start planning.
Download our free 401(k) guide
Our guide to 401(k) plans, IRAs (Individual Retirement Account) and other retirement assets aims to show you the differences between different US retirement assets, which one could be right for you and to assess your options when it comes to shifting your retirement account if you now live outside the US.
