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401(k) Rollover

For many, retirement is an attractive option whose time has come, even if for some, it is early. Certainly, the pandemic changed how people work. What hasn't changed is the way the American workforce prepares for retirement.

Many live for years as "retired workers" who still need income to survive. Indeed, everyone who paid taxes through decades of work will receive Social Security and Medicare. Unfortunately, Social Security and Medicare are meager stipends most cannot live on.

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Then came the 401(k) as a retirement-focused way to put away money. If managed properly, the 401(k) will provide lasting income for the rest of a comfortable and enjoyable retirement. Perhaps you started a 401(k) with a current or former employer and forgot about it?

As someone who is at, or fast approaching retirement age, you should plan. As you plan, keep in mind some rules must be followed. This page presents facts about 401(k)s and answers a handful of 401(k)-specific questions you'll find useful as you plan your retirement.

What is a 401(k)?

A 401(k) is a tax-deferred government-supported savings plan. The IRS notes a 401(k) "is a feature of a qualified profit-sharing plan…" Interestingly, 401(k) gets its name from the section of the U.S. code that contains laws the IRS must follow. Passed in 1978, a 401(k) gives people retirement funding options beyond the standard Social Security Pension Plan.

What Is an IRA Rollover?

When you switch employers from one who helped you contribute to your 401(k) to another employer that does the same, you have some options. Arguably, the best financial option is to "roll over" the funds in the old 401(k) to an individual retirement account (IRA).

A 401k rollover to IRA lets you grow the funds "tax-deferred" until you pull them out. If you cash out your old 401(k), you'll need to pay taxes on the money as if it were income. A 401k rollover to IRA keeps taxes out of the picture until you can afford to pay them.

What Is My 401(k) Asset Allocation?

As a retirement savings vehicle, the funds in a 401(k) are known as "solid" assets. Once someone gets to retirement age, the 401(k) funds become "liquid," meaning they are taxable. Fortunately, early withdrawal penalties no longer apply.

More Questions and other FAQs

U.S. tax law can be complicated. Below are just a few of the most important 401(k) related questions people might ask.

I left my job, now what?
If you left your job, you probably have a good reason. If you have many work years ahead, just roll the old 401(k) into an IRA. If the new employer does 401(k) offerings, you'll get to start a new 401(k) account.

Can I live on my 401(k)?
The answer depends on two key factors. How much you put away each week and how close you are to retirement age. If you're close to retirement and the financial numbers look good, you can live on a 401(k)

How much should I be saving to retire the way that I would like to?
The standard saving rate is between 10% and 15% of your yearly income. With an employer match, the funds could be substantial.

Can I move my 401(k) to an IRA without penalty?
There is no financial penalty for following through with a 401(k) to IRA rollover.

How long do I have to roll over a 401(k) after leaving my job?
You have sixty (60) days to complete the rollover

What happens if I don't roll over my 401(k)?
A 401(k) is a savings account that will continue earning interest until the money's gone. However, financial penalties apply if you miss the 60-day deadline.

Should I pay an advisor to roll over my 401(k)?
Hiring a tax advisor or attorney helps you get the most from your money. Better yet, an attorney working with a CPA or other financial officer might help you find money you didn't realize you had coming.



Given the ongoing Covid-19 pandemic, there is continuing talk about early retirement. The Consumer Finance Protection Bureau (CFPB) has useful information regarding early retirement. Conversely, there are things you can do to mitigate the hardships early retirement might cause you and your family.

Following the rules for 401k rollover near Orange, CA does not need to be difficult. All you need is the correct tax advice. The IRS can be sticklers about tax law. Consequently, following all 401k rollover rules ensures your retirement plan stays relevant to your future financial needs. Get in touch with Haro Financial Services to ensure that you make the most of your 401(k) rollover!

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