Robert Snow, Houston,Texas Financial Adviser with Morgan Stanley

NEW YORK - Feb. 29, 2020 - PRLog -- Robert Snow, Houston, Texas Financial Adviser with Morgan Stanley assists in explaining how rolling your 401(k) retirement plan into an IRA can provide flexibility in the types of investments you can choose. In this article, we will review the benefits of rolling your 401(k) into an IRA account.

Using over 20 years of experience Rob Snow ensures to provide effective results of people's hard-earned money. He is the senior vice president of the cornerstone financial group located in Houston, Texas. Morgan Stanley has 16,000 financial advisers in all 50 states.

Throughout his work life, Rob Snow has maintained a disciplined way of investing as he focuses on long-term financial goals. He has been through some of the major shifts happening in the global financial market. The whole knowledge and expertise have resulted to build and protect high net worth individuals.

Robert's main rule is his time-tested way of doing business. Morgan Stanley's true foundation is its guarantee of sound investments made through professional research.

Why would you roll over your 401(k)?

If you leave your employer, you might need to roll your 401(k) over to a retirement solution that's not linked to your employer.

Moving to a new employer: If you're moving to a new employer, you can move your 401(k) over to the new employer's investment firm, if there are advantages. For example, if there aren't enough investment choices at the new employer, you might decide to move your 401(k) to an IRA.

Retiring or no new 401(k): If you'll no longer going to have access to a 401(k), you'll need to move your money to an IRA.

Many 401(k)s charge 3% per year because they are covered by a variable annuity contract that acts as a layer of insurance. IRAs tend to be less expensive because most don't provide that layer of protection.

Some details on IRAs

As a rule, you'll move to the same type of IRA that you have for a 401(k). If you have a Roth 401(k), choose a Roth IRA. For a traditional 401(k), choose a traditional IRA. You can make the change from tax-free to tax-deferred, but there might be some unpleasant losses to taxes now. Keeping the same types of retirement accounts keeps the tax implications consistent.

Most IRAs allow you to invest in almost any asset: stocks, bonds, mutual funds, exchange-traded funds (ETFs), certificates of deposit (CDs), real estate investment trusts (REITs), annuities. With self-directed IRAs, you can expand your portfolio even further with even more assets, Iike gas and oil leases, commodities, and physical property.

Traditional IRA

A traditional IRA allows you to make tax-deductible contributions; your current contributions are tax-deductible now. You pay taxes on your IRA withdrawals. You pay tax on the earnings as well. Also, you're required to withdraw money at age 72 and after, even if you don't need the funds. This is the Required Minimum Distributions (RMD) rule, as set by the federal government.

Roth IRA

A Roth IRA treats the entire account as taxable now, while you're working. This means you pay the tax on your income and any earnings as they happen. When you begin your post-retirement distributions, you'll withdraw money tax-free. This is very popular for those who want to maximize their retirement funds; there's no tax deduction from their money when they've stopped working.

A Roth IRA also lets you leave the money in the account, tax-free, indefinitely. There are no lifetime distribution requirements. You can even give the IRA to your heirs and the money grows tax-free. Heirs are required to withdraw the funds over a 10-year period after your passing under new rules established by the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019.

If you have a Roth 401(k), it's only common sense to rollover to a Roth IRA since the income in the 401(k) is already tax-free. You can roll a traditional 401(k) to a Roth IRA, but there will be some complex tax implications. This might make it worth talking to a retirement adviser.

Choosing an IRA

For most people, choosing an IRA is dependent on several factors:

●   Where are you financially versus where you expect to be after retirement

●   What tax bracket are you in now?

●   Are you in a traditional or a Roth 401(k) now?

If you'll need your money in the next five years and you're in a high tax bracket, you might want to choose a traditional IRA. The taxes will be paid when you take money out. Since you're not in a position to let the money grow tax-free, you might as well save the tax now and handle it in a few years.

If you're starting in a lower tax bracket but will make more money later and be in a higher tax bracket, you might go ahead and pay the taxes now and put everything into a Roth IRA.

If you'll need the money before 59 ½, you can expect to pay a 10% penalty plus taxes on anything you withdraw. There are some exceptions, like buying a house, but otherwise, there are some expenses to withdrawing money from an IRA. Withdrawals from a Roth IRA are never taxed, so you might choose a Roth IRA if you think you might need the money before 60 years old. You do need to hold the money for five years, or you'll be taxed and you might pay a 10% penalty.

You can split your money between a traditional and a Roth IRA to get tax benefits from both sides. You don't have to split it 50-50. There might also be a great mix of investment options that can grow your money.

Staying where you are

In some cases, your former employer may offer to keep your 401(k) in place when you leave. This can work. The biggest question is are there better investment options for you in another program? If not, keep your 401(k) in place may work.

If you're doing well with your 401(k), that might also be a reason to stay the course. There are some tax advantages and there are financial protections for your 401(k) that keep your money in place in the event of bankruptcy or lawsuits.

Getting personal advice

As you can tell from this article, a 401(k) rollover is easy to do, but making the right choice as to where to go with it can be complex. It's worth speaking to a retirement adviser you can trust who can help you make the right choice for your needs, and factoring in your entire retirement and investment portfolio.

About Rob Snow

Rob Snow joined Morgan Stanley in Houston in October 2008. Since that time, he has risen to the role of Senior Vice President and Financial Adviser. For over 20 years, Robert has been helping Texans to plan for their future and make their present brighter.

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