America’s Retirement Asset Distribution Professional, Andrei Hall explains why Employees must understand the myriad of issues inherent in the decision of whether to roll over a plan account to an IRA.
Andrei S. Hall, CFP, CPRC
PRESIDENT, HALL WEALTH MANAGEMENT GROUP
Andrei.Hall@lpl.com
949-222-6401
HWMG-LPL.COM
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When it comes to retiring with financial stability, a vital factor is how much one has saved in their retirement account. One significant aspect of retirement planning to consider is the type of account the retirement savings is in. For those who plan on leaving their current employer, their retirement savings can be easily transferred to an Individual retirement account (IRA), and the HWMG-Employer Plan to IRA Rollovers is an option worth considering. This method of transfer can save retirees a significant amount of money, and it is essential to understand how it works.

Week 4 in the HWMG series of employer plan to IRA rollovers focuses on “This Transfer Method Will Save You The Most Money.” The transfer method being referred to is the direct transfer, also known as a trustee-to-trustee transfer. This method is the most cost-effective way to move funds from an employer-sponsored plan to an IRA, and it eliminates the risk of penalties or taxes from the Internal Revenue Service (IRS).

When using this transfer method, the money is transferred directly from the employer-sponsored plan to an IRA in the individual’s name, without the individual physically receiving the funds. This type of transfer does not trigger any taxes, and it qualifies the transferred money as a rollover. This rollover will not reduce the individual’s contribution limit for the year, and it will not count as taxable income.

The advantage of a direct transfer is that it bypasses the individual’s possession of the money, so there is no withholding from the employer. This technique works well for those who prefer to avoid the chances of default withholding, thus preventing unnecessary taxes and penalties.

Additionally, the direct transfer process is a lot less complicated than other transfer methods, as there is no need to issue a 1099-R tax form. There is no need for individuals to handle the money or worry about the transfer process itself, making it easier and less stressful for retirees.

In conclusion, those who are thinking of transferring their retirement savings from an employer-sponsored plan to an IRA after leaving their employer must consider direct transfer as their best option. With direct transfer being the most cost-effective way to move funds from one plan to another, it eliminates the risk of penalties or taxes during the transfer process. As simple as it may seem, using a direct transfer process can save retirees a substantial amount of money by avoiding costly penalties and taxes that can cause a significant reduction in their savings.