Should You Move Your 401k To An IRA?

A good answer to this question would be to ask the people that worked for Enron. As a result of the unfortunate outcome at Enron, companies now offer what is called a Non-Hardship In-Service Distribution.  This allows individuals to rollover a portion of their 401k and re-position it outside of the company established 401k account into an IRA.  You will have to have obtained the age of 59 1/2 in order to make the move, and will need to ask your plan administrator about other stipulations such as vesting, that could prohibit you from having access to your funds.  

 

 The videos below address some issues with your 401K you may not be aware of.

IRS Publication 590 Appendix C (Uniform Lifetime Table)

The RMD (Required Minimum Distribution) is a forced payout starting at age 70 1/2, that requires you to cycle your IRA money through the tax system.  The starting factor is 27.4 and decreases each year as you age which increases the percentage you take out each year.  No matter what vehicle you have your IRA in, CD's, Stock, etc., you will eventually withdraw principal.  The first year, your account will have to make at least 3.65% just to maintain your principal.  You can see in the chart above that the percentage your account will have to make increases each year.  If your IRA or 401K are in the wrong type of account, your money could deplete rapidly and run out.  

 

Annuities are desinged to pay income for life and are the only vehicle designed to work hand in hand with what the government is already going to require you to do, and that is take a distribution from your IRA.  By re-positioning your money into an annuity, you can turn on an income stream that will pay you for the rest of your life and will satisfy the RMD.  Most annuities start the income payment at around 5% of the income account value and some can even increase when there is a gain in the account which makes your income grow each year.  Doesn't it make sense to re-position your IRA into an account that is designed to do exactly what the government is going to require you to do?  The absolute best way to take your RMD is through an income stream through an annuity.  

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