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Retirement Rollover Mistakes to Avoid

What's the biggest mistake people in Minnesota make when it comes to rolling over their retirement accounts?

When it comes to your retirement accounts, it's important to know the rules regarding rolling over your accounts. Rolling over your retirement accounts doesn't have to be complicated. With the right tools and information, you can rollover your accounts without any issues. Below are some of the biggest 401(k) rollover mistakes that you should avoid.

MISTAKE #1

The biggest mistake you can make when it comes to rolling over an employer sponsored plan is not rolling over the funds within 60 days. When you take constructive receipt of the funds from your 401(k) or other employer sponsored retirement plan, you only have 60 days to rollover that entire amount into a new account. If you don't, that amount is treated as income for the year. You will have to pay taxes in a significantly higher tax bracket than you should have. Another item to mention about taking receipt of the money, is that the employer plan will withhold 20% for tax purposes. This means that you will have to rollover the entire check into a new account AND make up the extra 20% from your own personal accounts.

MISTAKE #2

The next mistake is rolling over all of your employer sponsored plan and not being about to take a withdrawal from it without incurring a penalty. If you are between the ages of 55 and 59 and you are separated from your company that holds the plan, you can take withdrawals from your 401(k) or other employer sponsored plans without incurring a penalty. This is why people may want to consider leaving some of the money in their 401(k) if they are between the ages of 55 and 59. Having money left in that plan gives you the flexibility of withdrawing funds if you need it. The amount that rolls over into a IRA can not be withdrawn from until the age 59 1/2 without incurring a 10% tax penalty (with some exceptions). 

Watch this video to learn more information on how to rollover your employer sponsored retirement plan in Minnesota. You can also read this article that talks more about retirement account rollovers. If you would rather speak to a financial professional, then click here to schedule a no obligation meeting with Peter O'Brien to help you determine what your options are regarding your retirement accounts.