NEW YORK, NY / ACCESSWIRE / April 23, 2024 / When a person leaves a job with a 401(k), they can choose to cash it out, leave the funds in their current plan, or transfer them to the new employer's plan. However, it is important to note cashing out a 401(k) may impose early withdrawal fees and taxes. Another option is to roll the funds into an individual retirement account (IRA) such as the one offered by Yieldstreet.
Retirements can entail 401(k) rollovers as well. Additionally, some companies' 401(k) plans permit employees to shift funds into outside IRAs while they are still working there in order to continue contributions into an existing plan uninterrupted. This 401(k) "in service rollover" also has certain tax advantages. These types of rollovers also have the potential to promote effective retirement savings management and help diversify investments.
Here are five tax benefits of a 401(k) rollover worthy of consideration.
For those who opt to receive cash distributions, or leave their plan balances intact, the tax rules for rollovers can be straightforward. The rules can be more complex and restrictive in some cases for those who choose to maintain their plan's tax-favored status. However, going with a direct rollover to a plan like Yieldstreet's IRA holds the potential to avoid tax pitfalls. Understanding the rules can help avoid costly tax errors capable of substantially disrupting retirement plans. Speaking with a tax advisor, finance professional or a retirement plan custodian can help ensure the best decisions are made.
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Seba Koshy
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SOURCE: Yieldstreet
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