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What to know about the new federal rules involving 401(k) rollovers to IRAs

Published: Aug. 17, 2021 at 6:39 AM EDT
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LEXINGTON, Ky. (WKYT) - If you have accumulated any amount in your 401(k) retirement plan at work, there is always a decision that arises in what should you do with the money when you retire. One option is to keep the money in the retirement plan or roll it into an Individual Retirement Account to maintain your tax-sheltered status a little longer. Independent retirement planner Josh Smith joined us on the newscast to discuss new regulations that the U.S. Department of Labor passed that impact financial advisors and those they work with.

“Rollovers are movements of money from one tax-sheltered plan into another, especially switches from 401(k)-style accounts into IRAs,” said Josh Smith. “There’s no requirement to roll or transfer money from a workplace plan into an IRA, but it’s often the best option as you can continue deferring taxes.”

The new Department of Labor regulations, which took effect in February and likely will be enforced starting in December, seek to prohibit advisers from receiving payments from third-party investment companies that create conflicts of interest when dispensing rollover guidance.

“The rule is trying to make clear that not all advisors are fiduciaries, who put their clients’ best interests first,” said Smith.

Whether or not you’re working with an adviser on a rollover, it’s important to have a basic understanding of how to move money from a 401(k)-style plan into an IRA.

“Rollovers aren’t especially complicated, but it’s important to do them right. That’s why the department is taking a closer look at how financial advisors are handling them.,” said Smith.

If you are looking to pursue an encore career, consider discussing with a financial planner to ensure it won’t hurt you financially. To see additional stories surrounding business and economic news for the Lexington area, visit https://www.WKYT.com/MoneyMatters/ and if you have a question for Josh send an email to info@swdgroup.com.

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