Has Your Work Situation Changed? You Can Roll Your 401(k) Funds into a Self-Directed IRA

Has Your Work Situation Changed? You Can Roll Your 401(k) Funds into a Self-Directed IRA

Do you have a retirement plan that is still with an employer where you are no longer working? If you have recently lost a job due to COVID-19, or are in job transition, make sure you don’t leave your old 401(k) plan behind. If yours is still with a previous employer, you can rescue those funds and roll them over into a self-directed IRA.

Right now, it’s unclear for many workers if or when there will be a new employer with a new workplace retirement plan. However, one thing is clear: opening an IRA (Roth or Traditional) is an option that enables individuals to make sure their retirement savings stay with them. Moreover, if that new retirement plan is self-directed, there is a much wider range of potential investment options available that account holders—not their employers—control.

Rollovers into self-directed IRAs

Since most 401(k) plans are limited in terms of allowable investments, rescuing and rolling over those funds into a self-directed IRA opens up the door to greater investment opportunity, without the limits imposed by most plan sponsors on the defined contribution plans they offer. As you may know from your existing 401(k), most of those plans are limited to investing in mutual funds or exchange traded funds, stocks, and bonds. Opening a new self-directed IRA will enable you to include an array of alternative assets that you may already know and understand, such as real estate, private equity, precious metals, hedge funds, secured and unsecured notes/loans, energy investments, and more.

Through self-direction, you’ll build a more diverse retirement portfolio, create a hedge against stock market volatility, and gain better control over your investment returns as part of your retirement strategy. You’ll also have the flexibility of buying and selling your investments when you choose, rather than according to a prescribed schedule that most 401(k) plans follow.

You can choose to do a rollover into a new Roth or Traditional IRA, or a SIMPLE or SEP IRA, depending on your employment status, overall tax situation and how far out you are from retirement. As always, we recommend you discuss your unique scenario with a trusted advisor. You may also have to check with the current plan administrator to see if there are any restrictions concerning the type of IRA allowed for a rollover from the existing 401(k).

How to roll funds over into a self-directed IRA

At Next Generation, our comprehensive starter kits walk you through all the steps needed and required documentation to submit in order to open a new self-directed retirement plan with us, and include a rollover form for Traditional, Roth, SEP, or SIMPLE IRAs (we have starter kits for other types of plans as well). Moreover, our helpful team of professionals are available to answer questions about opening a self-directed IRA or about the many types of non-publicly traded, alternative assets, these plans allow. You may schedule a complimentary education session; or you may contact Next Generation by phone at 888.857.8058 or by email at NewAccounts@NextGenerationTrust.com.

The SECURE Act and Self-Directed Retirement Plans

The SECURE Act, signed into law on December 20, 2019, is comprehensive legislation written to expand retirement savings, simplify existing rules, preserve retirement income, and improve plan administration. SECURE stands for Setting Every Community Up for Retirement Enhancement.

The bill mostly makes significant changes to workplace retirement plans; other provisions affect retirement plans in general, including self-directed IRAs. Here is a look at some of the changes, effective January 1, 2020.

Individuals

For those who own a self-directed Traditional or Roth IRA:

Business Owners

For business owners who have a SEP IRA, Solo 401k, or other qualified retirement plan:

All SECURE provisions have tax consequences for individuals and plan sponsors. As always, the team at Next Generation strongly recommends you consult your trusted advisor regarding how the SECURE Act provisions may affect your specific tax situation.

Secure a more diverse retirement portfolio through self-direction

In light of the recent changes, consider including alternative assets within a self-directed retirement plan. Those who are comfortable making their own investment decisions and who understand certain nontraditional investments can build up their retirement savings—and hedge against stock market volatility—with such assets as real estate, precious metals, private equity, hedge funds, private notes, and more.

At Next Generation, we’re here to answer your questions about self-direction as a retirement wealth-building strategy, or how certain provisions of SECURE may affect your self-directed retirement plan. You can arrange a complimentary educational session with one of our representatives, or contact us directly at 888.857.8058 or NewAccounts@NextGenerationTrust.com for more information.

Millennial Business Owners are Fans of Retirement Plans

Here’s something that may surprise you: younger business owners of the millennial generation are putting their employees’ retirement on their radar more so than their older counterparts (Generation X and baby boomers). According to a Nationwide survey, millennials are more aware of the importance of a workplace retirement plan and are nearly twice as likely as the average business owner to say they will offer retirement benefits to their employees in the future (69 percent vs. 36 percent).

Having grown up during the Great Recession, this generation has seen firsthand the importance of planning ahead financially. In addition to their own spending, money management, and retirement savings, they are thinking of their employees’ financial futures as well. The survey revealed that:

Self-directed retirement plans for employees and employers

Did you know that as a business owner, you can offer a SIMPLE IRA that your employees can self-direct? Or as a self-employed person, you can self-direct a SEP IRA?

A SIMPLE IRA retirement plan can be established by employers, including self-employed individuals (sole proprietorships and partnerships) for the benefit of their employees. Eligible employees can contribute part of their pretax compensation to the plan. For individuals who are savvy about nontraditional investments, they can include those in their self-directed SIMPLE IRA. As you know, self-directed IRAs allow investors to include a wide range of non-publicly traded alternative assets, such as real estate, precious metals, lending and private equity.

 

If you are a business owner and would like to offer a SIMPLE IRA to your employees, or open a SEP IRA for yourself—or as an individual, you wish to open a self-directed IRA and build a more diverse retirement portfolio—Next Generation’s team can help you get started. Contact us at NewAccounts@NextGenerationTrust.com or 1.888.857.8058 today!