Archive for the ‘401k’ Category

Can you have an IRA and a 401K?

by IRA Rollover in 401k, Gold IRA, Roth IRA with Comments Off on Can you have an IRA and a 401K?

If you are planning to save for your retirement you will inevitably ask can you have an IRA and a 401K at the same time.  Yes, you can, but there are important differences in the two accounts and many strategies you can use to optimize your funds.  In fact, many people get both types of accounts so that they can save and invest more in anticipation of an enjoyable and well-funded retirement.

There is a difference between the two accounts.  A 401K is an employer sponsored plan in which your employer contributes to the 401k roth irafund, sometimes matching your own contributions dollar for dollar.  This means you get up to twice as much in the account.  If you open an IRA you are the sole contributor.  As you can imagine, having both types of accounts means you have more security and many people see the logic of legally saving and investing every cent they can to insure a comfortable retirement.

There are legal federal restrictions on the amount that can be contributed to both types of accounts, depending on your income.  You can contribute more if you are 50 or over but less if you make over $122,000 as a single taxpayer.  Married couples who make a combined income of more than $179,000 cannot contribute to a Roth IRA.  You should check with a financial advisor to determine your contribution limits; you may not be subject to limitations on any retirement account if you are a low or moderate income taxpayer.

If you leave your employer you don’t want to leave your retirement funds with that employer.  You can convert that 401K to Roth IRA or a traditional IRA.  Transferring 401K to IRA accounts is a simple matter of contacting a broker, setting up an IRA, and completing the paperwork necessary to transfer the 401K funds into your new IRA.  You must put the funds from the 401K into the IRA within 60 days, however, or pay a hefty tax on it.  Completing the arrangement on day 61 can be very costly!

You can also convert 401K to gold in an IRA, which is what a lot of people are doing right now.  Faced with economic uncertainty, the threat of inflation, and a falling dollar there are many investors of all ages that are protecting their assets by buying gold.  The gold’s value is transferred to the IRA while the actual metal is stored in a federally approved, secure, and insured facility.  The value of that gold, unlike the dollars you invest, will never fall even though the price may fluctuate.  Gold will remain viable even if the dollar fails completely.

As you wonder can you have an IRA and a 401K at the same time you can be assured that both accounts can help your golden years be enjoyable and rewarding.

Rolling Over 401K or IRA – Things to know and how to do

by IRA Rollover in 401k, Gold IRA rollover, Roth IRA, Traditional IRA with Comments Off on Rolling Over 401K or IRA – Things to know and how to do

When considering rolling over 401k and IRA it is important to look at all your options, weigh them carefully, and know exactly what you’re doing – otherwise you risk being taken advantage of in a bad deal or committing to earn less than you should be getting.

This process is easier to begin if you know which type of account you’d like to open.

401k Definition and IRA

An IRA (Individual Retirement Account is a privately funded account that you deposit money into yourself, at your own discretion. A 401k is an account that is set up by your employer, where a portion of your paycheck is deposited into it, and oftentimes your employer contribute as well.

Types of Plans

There are many different options to consider when choosing your retirement accounts.

IRAs

  • Traditional IRAs – A traditional IRA is the oldest  and most widely used type of account. The money deposited into your account qualifies for a tax deduction. This amount is sheltered from taxes until withdrawn – whenever that may be. This allows you to hold onto dividends, interest income, capital gains and rental income. When money is withdrawn, however, you must pay taxes on it (the same amount you would pay from your paycheck).
  • Roth IRAs – Roth IRAs give you much more freedom than a traditional plan, allowing you to deposit cash without a tax deduction, but the money from that will grow in your account tax free.  You will not owe the government any money when you withdraw – which can begin at 59.5 years of age.
  • SEP IRA – This type of account is often used by self-employed individuals who have few or no employees in their company. It uses the same basic rules as the traditional IRA but you may contribute much higher amounts.
  • Simple IRA – Used mainly by small business owners, a simple IRA touches on all three types of accounts. If you are less than fifty years of age you may contribute up to a certain amount, while those over 50 can allocate more.

401Ks

  • Traditional 401k– A traditional 401k offers the most flexibility in its options. It gives employers the option to make a 401k contribution limit that matches the employees’ deposits, or they can make  one contribution on behalf of all. It also allows employees to make pre-tax elective deferrals. It can be used by any sized company and can be combined with any other retirement plan.
  • Safe Harbor 401k – A safe harbor 401k plan means that the employer must provide contributions that are fully vested when made. It is subject to the same tax rules as the traditional, but it is for companies of any size, and may be combined with other plans.
  • Simple 401k – A simple 401k is available to employers who have 100 employees or less, who were paid at least $5,000 in income the previous calendar year. The employer is required to make contributions
  • Roth 401k – Roth accounts allow the employee and employer to contribute savings without income restrictions. Taxes must be paid up-front, eliminating the need to pay them down the road, but there are no special prerequisites to obtain a Roth.

Rollover Options

Now that you’ve chosen your account, you can consider some rollover options for both types.

  • 401k and rollover IRA– Many people choose to rollover their 401ks into their IRAs because of the increased amount of freedom it gives them and the money it may save in fees. You also have the option to switch between brokerage firms to take advantage of different features and benefits available in IRAs. This allows your retirement savings to grow tax-free.
  • Keeping Open – keeping cash in your current plan, even when switching employers can benefit you if your current deal has low-fee investments that suit you. You will have to ask your financial consultant if this is possible, and whether or not there would be fees involved. Also consider asking if there would be implications to rolling over this plan later on.
  • Rolling Over to your new 401k – You will have to work with your new 401k company’s administrator to make the process go as smoothly as possible. This is the best option if your new plan would offer better benefits than your current one, or than an IRA.
  • 401k early withdrawal – This option may seem attractive at first, particularly if switching employers means your salary will be cut – but it is most often the worst choice to make. You might be subject to a 10% early withdrawal fee, you will have to pay taxes (federal and state) when you withdraw, and if the amount is great enough, it will push you into a higher tax bracket, meaning increased taxes at the end of the year.
  • Gold IRA Rollover – While making an investment in gold, or transferring your funds into a gold IRA may seem like a good invest in goldidea, a rollover is usually a safer bet when you want your cash backed by gold. You will need to check with your employer first (some do not allow investment in gold from a rollover 401k). You will also need to decide if you’d like your deposit to be in physical gold – this will require an IRS-approved storage facility being used. The gold must also be 99.9% minimum purity, and can include coins such as the American Gold and Silver Eagle, or bars like the Credit Suisse gold bar.  Another option, Gold ETF, doesn’t require you to keep physical gold, but it is more like a stock than actual gold bars or coins – it could have a much lesser value than physical gold, as well as increased risk of prices falling.

Overall, there are many options to consider when not only investing in a retirement plan, but when choosing to rollover to a new one. Whether you’re rolling over a 401k or an IRA, be sure to look at all aspects of your situation, your possible future options and scenarios, and your backing options to ensure that you will retire comfortably, without worry or stress about your financial health.