DON’T Rollover Your 401k #shorts #retirement #retirementplanning
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DON’T Rollover Your 401k || 401k Rule 55|| Retirement Income Planning

In this video, I want to talk about the Rule of 55 for 401k’s and why if you are thinking about retiring early you should NOT rollover your 401k.

The Rule of 55 is an IRS guideline that allow individuals in retirement to pull out retirement income from their old 401k without paying the 10% penalty for early withdrawals. This rule applies to 401k’s and 403b’s. The rule applies whether you are let go from work or you decide to retire.

Why does the 401k rule of 55 matter? Because in today’s world of FIRE movements and individuals wanting to retire at 55, the 401k rule of 55 gives retirees a way to get retirement income without paying a 10% penalty from qualified retirement assets.

Remember, you are not allowed to take retirement income from retirement accounts like IRA’s, Roth IRA’s, SEP-IRA’s, or other tax advantaged accounts until you are 59.5 without incurring a 10% penalty. There are a few exceptions to this penalty for IRA or Roth IRA owners, but those exceptions mean you have a terminal illnesses or chronic illness.

In order for the 401k Rule of 55 to comply you must follow two important rules:

1. You must leave your job the year you turn 55 or later
This means that if you retire at the age of 55-59.5, you can apply the 401k rule of 55 to your current 401k and take out retirement income without penalty. If you retire at 52 and then take retirement income out of your current 401k at 55, you will be penalized the 10% by the IRS.

2. You can only withdrawal Retirement Income from your current 401k
This means you can’t apply this rule to an old 401k that you had at a previous job. It must be your CURRENT 401k. A quick tip here, if you have old 401k’s and you want to retire early, roll the old 401k’s into your current 401k BEFORE retiring.

I hope you find this video helpful in your Retirement Journey. Thank you for watching!
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When it comes to retirement planning, one important decision many people face is what to do with their 401(k) when they leave a job. While rolling over your 401(k) into a new retirement account may seem like a convenient option, it may not always be the best choice.

Rolling over your 401(k) into a new account can have its benefits, such as consolidating your retirement savings into one place and potentially offering more investment options. However, there are also some drawbacks to consider.

One reason not to rollover your 401(k) is if your current employer’s plan offers lower fees or better investment options than what you would find in an individual retirement account (IRA). By leaving your money in your old 401(k), you may be able to take advantage of these benefits.

Another reason to consider not rolling over your 401(k) is if you want to take advantage of the “Rule of 55.” This rule allows individuals who leave their job at age 55 or older to take penalty-free withdrawals from their 401(k) without having to pay the usual 10% early withdrawal penalty. This can be a useful option for early retirees who need access to their retirement savings before age 59 ½.

Additionally, if you have company stock in your 401(k), there may be tax advantages to leaving it in the account. By using a strategy known as Net Unrealized Appreciation (NUA), you may be able to transfer the stock to a taxable account and pay lower taxes on the appreciation when you eventually sell the stock.

Ultimately, the decision to rollover or not rollover your 401(k) will depend on your individual financial situation and retirement goals. Before making any decisions, it’s important to consult with a financial advisor who can help you weigh the pros and cons of each option.

In conclusion, while rolling over your 401(k) into a new account may seem like the easiest choice, it’s important to carefully consider all of your options before making a decision. By doing so, you can ensure that you are making the best choice for your retirement savings and financial future.