iCrowd Newswire
26 May 2023, 03:50 GMT+10
According to a Marist Poll released in September 2022, roughly 4 in 10 (38%) Americans have switched jobs since 2020. This movement is known as the Great Resignation, which is motivated by the desire for better compensation, including health benefits and retirement accounts. In this article, we'll explain how to rollover 401(k) funds without incurring a tax liability.
One of the concerns with transitioning to a new job is how to retain all the retirement savings you built up at your previous job. Some companies will allow you to keep your current 401(k) with them, but you'll pay a fee for them to maintain it. A common practice is either rolling over your 401(k) with your new employer or cash it out. There are several ways to do this.
A 401(k) rollover directly to another 401(k) does not come with a tax liability. The contributions are tax-deferred on a 401(k), so you won't need to pay taxes until you start taking distributions in retirement. This is an advantage for you because income is typically lower in your golden years, putting you in a lower tax bracket.
Traditional IRAs are built with pre-tax contributions, so you can do the rollover without a tax liability. If you're rolling over into a Roth IRA, you'll need to pay taxes. In both cases, your maximum contribution levels will go down. In 2023, the IRS allows up to $6,500 a year in contributions to an IRA, $7,500 if you're over 50. The maximum for a 401(k) is $22,500.
You'll need to pay regular income tax on 401(k) funds rolled into a Roth IRA. That ranges from 10% to 37%, depending on your income bracket. Keep in mind that the funds themselves will push you into a higher income bracket. Taking a check could be worse. You'll pay a 20% flat tax plus another 10% penalty for withdrawing the funds before retirement age (59 ½).
The best way to avoid paying taxes on a 401(k) rollover is to roll it into a 401(k) account at your new employer. That process is tax-free. If it's unavailable, your next best option is to rollover into a traditional IRA, which is also a tax-free transition. Rolling over into a Roth IRA incurs a tax liability of 10% to 37%. Cashing out will cost you 20% plus a 10% penalty for early withdrawal.
https://www.hrblock.com/tax-center/income/retirement-income/reporting-401k-rollover-into-ira/
https://www.investopedia.com/articles/personal-finance/072215/401k-rollovers-tax-implications.asp
https://smartasset.com/taxes/avoid-taxes-on-401k-withdrawals
https://www.investopedia.com/articles/retirement/08/convert-401k-roth.asp
See Campaign: https://iquanti.com
Name: Keyonda GoosbyEmail: keyonda.goosby@iquanti.comJob Title: PR Specialist
Tags:Go Media, CE, ReleaseLive, Google News, Reportedtimes, IPS, Extended Distribution, iCN Internal Distribution, EnglishGet a daily dose of International Technology news through our daily email, its complimentary and keeps you fully up to date with world and business news as well.
Publish news of your business, community or sports group, personnel appointments, major event and more by submitting a news release to International Technology.
More InformationNEW YORK CITY, New York: Before the start of its annual Worldwide Developers Conference this week, Apple shares hit a ...
MENLO PARK, California: Facebook parent Meta has said that under a trial that could last through the end of June, ...
DUBLIN, Ireland: To retain thousands of high-tech jobs in future years, Ireland must become a "global hub" for artificial intelligence, ...
© Provided by Xinhua Official data showed the rapid development of the import and export of goods at the Hainan ...
NewsVoirMumbai (Maharashtra) [India], June 9: SBM Bank India today unlocked exclusive, on-invitation access to the world of luxury with the ...
GLOBAL PR CONNECT (GPRC)New Delhi [India], June 9: Bird ExecuJet Airport Services Private Limited was named the sole General Aviation ...
NEW YORK CITY, New York: Before the start of its annual Worldwide Developers Conference this week, Apple shares hit a ...
MENLO PARK, California: Facebook parent Meta has said that under a trial that could last through the end of June, ...
DUBLIN, Ireland: To retain thousands of high-tech jobs in future years, Ireland must become a "global hub" for artificial intelligence, ...
Mumbai (Maharashtra) [India], June 10 (ANI): The BJP's Maharashtra president Chandrashekhar Bawankule on Saturday said a certain narrative about Sharad ...
New Delhi [India], June 10 (ANI): From June 16, cricket enthusiasts across the world will have their eyes riveted on ...
© Provided by Xinhua The Hungarian FM attributed the success of the flourishing Hungarian-Chinese relations to the Eastern Opening Policy ...