Among the many great benefits of working for AT&T is the ability to open and invest in a 401(k) account. It serves as an additional financial vehicle that can be used to supplement your AT&T pension. However, there are many questions to be answered when it comes to your 401(k): Which funds should I invest in? Can I withdraw funds before I retire? What about taxes and penalties? Can I roll over my 401(k) before I retire?
Whatever your situation might be, the following are instances on why an IRA rollover may make sense for you:
MORE FLEXIBILITY AND CHOICES THAT FIT YOUR SITUATION While the AT&T 401(k) plan offers you the benefit of having a variety of investments for you to pick and choose from, an IRA offers a much larger pool of investments than a company-sponsored retirement plan typically will. With an IRA, you have the ability to invest in most publicly offered investments.
Having an IRA you have more options for investment vehicles at your disposal which gives you more investment options and the flexibility to tailor an investment portfolio around your situation, your goals, and how much risk you are willing to take. As a further benefit, your fees may also lower with less expensive investments.
NOT HAVING ALL YOUR EGGS IN ONE BASKET Investors will always tell you to never “put all of your eggs in one basket” – mainly because you could lose everything in a quick amount of time. However, under the IRA umbrella, you may diversify funds in different types of investments that may offer potential growth, liquidity, and guarantees.
KEEPING TAX BENEFITS THE SAME IRA’s provides similar tax advantages that 401(k)’s and other retirement plans provide. You may also add additional years of contributions to this account but there are restrictions based on age. You can only contribute up to $6,000 under the age of 50 or $7,000 for individuals 50 and over ¹. This flexibility also offers you the ability to convert your Traditional IRA to a Roth IRA at any time free of penalties, but regular taxes on the conversion will apply.*
AVOIDING PENALTIES WHILE MAINTAINING GROWTH If you are under the age of 59 ½ and withdraw funds from your 401(k), IRA or any other qualified account, the funds withdrawn are subject to both income tax and a 10% early withdrawal penalty.
However, funds that are directly transferred to a Traditional IRA are not subject to income taxes or early withdrawal penalties. Further, assets rolled over to an IRA can remain invested and can continue to experience growth.
Many people decide to roll over a portion of their 401(k), in order to invest in products such as fixed annuities, that protect themselves from future market losses; while still working and continuing to contribute and take advantage of the AT&T employer match.
THE FACT IS, YOU WILL BENEFIT WITH INVESTMENT MANAGEMENT EXPERTISE Having someone help you plan for retirement income takes one less thing off your plate and gives you greater freedom to enjoy your life. An IRA will give you access to a wider range of investment strategies that will help both protect and grow your funds over time.
If you have any questions or want more information on rolling over your 401(k) into an IRA, feel free to give us a call at 866.QUEST.01 (866.783.7801) for a no-obligation consultation with one of our financial advisors.
Investment Advisory services offered through ChangePath, LLC a Registered Investment Advisor. ChangePath, LLC and Quest Financial are unaffiliated entities. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Any references to protection or guarantee refer to insurance products, never securities products. Guaranteees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. Investing involves risk, including the loss of principal. No investment strategy can guarantee a profit or protect against loss in a period of declining values. Neither ChangePath, LLC or Quest Financial are endorsed or recommended by AT&T.
*Although qualified withdrawals form a Roth IRA are tax free, when converting a Traditional IRA into a Roth IRA, the entire converted taxable amount is reportable as income in the year of conversion.
Licensed Insurance Professional. We are an independent financial services firm helping individuals create retirement strategies using a variety of investment and insurance products to custom suit their needs and objectives. Investing involves risk, including the loss of principal. No Investment strategy can guarantee a profit or protect against loss in a period of declining values. Any references to protection benefits or lifetime income generally refer to fixed insurance products, never securities or investment products. Insurance and annuity products are backed by the financial strength and claims-paying ability of the issuing insurance company. The information is not intended to be investment, legal or tax advice. The agent can provide information, but not advice related to social security benefits. The agent may be able to identify potential retirement income gaps and may introduce insurance products, such as an annuity, as a potential solution. For more information, contact the Social Security Administration office, or visit www.ssa.gov.