Don't let your 401k rollover play dead

Most Common Mistakes:

1. Rolling over your 401(k) plan and forgetting about it. You would be surprised how many individuals roll over their 401(k) plan and never look at it again. They speak with a broker, roll over their 401(k) plan, open a Rollover IRA, buy the stock or fund of the month, and never look at their investment/account again. This from all the mistakes is probably the worse. The misconception I believe comes from the idea that retirement plans are long-term investments and that nothing can be done with them until retirement. Although the rules of retirement plans are confusing and may be interpreted this way, it is a misconception. Your retirement savings, similar to other investments, should be reviewed periodically.
   
   
   
2. Rolling over your 401(k) plan and letting it sit in a CD at your local bank. Although CDs may be an appropriate investment for some, it may not be for others. Younger individuals with a long-term time horizon could be missing potential stock market returns. The days of going to your local bank and opening up a retirement account for the free toaster are gone.
   Diversification is the key.
   
   
   
3. Did you know that you could make annual IRA contributions to your Rollover IRA? Depending on your particular situation, and whether or not later down the road you would want the option of transferring your savings into a future employer's plan; you could make your annual IRA contributions to your Rollover IRA. By contributing to your Rollover IRA, you continue to increase your savings and the potential of reaching your goals for retirement.
   
   
   
4. Maintaining several Rollover IRAs. The average worker changes careers/jobs approximately every 3 to 5 years possibly generating a new 401(k) rollover with each switch. Since the rules of retirement plans are so confusing, many individuals tend to play it safe by opening a new Rollover IRA for each 401(k) plan rollover. That's what we've always been told to do, right? Depending on your particular situation, and whether or not later down the road you would want the option of transferring your savings into a future employer's plan; you could consolidate your Rollover IRAs. By consolidating, you can:

• Save time when reviewing your statements.
  
• See a full picture or complete list of all of your investments.
  
• Allocate your retirement savings as a whole.
• Save money. Instead of paying several annual fees, you pay just one.
  

 “Remember, if you don't think about your retirement, who will? Don't let your 401K rollover play dead. With the help of a financial advisor, you increase the potential of reaching your goals for retirement."

By taking substantially equal periodic payments, you avoid incurring the 10% premature distribution penalty. The substantially equal distribution schedule selected must continue for at least 5-years or until you reach age 59 ½, whichever is longer, or you will be subject to a 10% premature distribution penalty on all payouts already received. Further details with respect to substantially equal periodic payment formulas are provided in IRS Notice 89-25.

All distributions from your retirement account are taxable in the year received. Please note, that at age 70 ½, you must begin taking minimum distributions from your retirement plan.

Distributions for any of the above reasons involve specific tax regulations and options. Please consult your tax advisor before requesting the distribution. This information does not constitute tax advice. FSC Securities Corporation and/or its representatives do not provide tax advice. Please consult your tax advisor pertaining to your particular situation.

Information and opinions expressed are strictly those of the author and may not be those of FSC Securities Corporation.