401k
401k Information

Ny Life 401k

Are you wondering if it is a smart idea to roll over your 401k plan into an IRA? Everyone’s situation is different and there are many things to take into account but for many of the families I talk to the answer is a resounding Yes. Why? There are many advantages that an IRA offers you that your 401k doesn’t. Let’s take a look at the 5 reasons you might want to do a roll over into an IRA.

Have you ever heard of the Stretch IRA? We don’t have the room to explain it in this article but it is one of the greatest gifts the IRS has ever given those of us who have IRA plans. It basically allows you to leave your IRA to your children or grandchildren and allow them to continue the tax deferral of your IRA over their lifetime. (certain restrictions apply) What does this have to do with your 401k? Many 401k plans do not allow for this option and will force your beneficiaries to cash out your plan much sooner than they would like if they are trying to postpone taxes. Won’t they have to pay tax eventually anyway? Sure but with the Stretch they can delay the tax so long that the compound tax-deferred interest will be so great that the IRS will never catch up. Leaving your money in your 401k may very well prevent you from using this wonderful tax planning tool. If this was the only consideration most people would do the rollover based on this alone but there are many other things to consider.

Another reason rolling the 401k over to an IRA makes since has a lot to do with the first reason. One reason the Stretch does not work well in a 401k is that your plan usually requires that you name a spouse as a beneficiary. Most of the time you and your spouse have about the same life expectancy and so this does not help you defer taxes much longer but it also presents another problem. The other problem is that when doing proper Estate Planning it is often a smart move to name children directly on certain assets to take full advantage of the Estate Planning rules. Doing so will often double how much money a couple can leave to their heirs without having their assets subjected to the dreaded estate taxes. Funds tied up in a company 401k plan do not allow you to name children or grandchildren without a signed waiver from your spouse. This can cause many problems as we get older as having someone sign a consent can become more difficult due to diminished capacity or other concerns. Even if you think this does not apply to you there are still many more reasons to consider rolling over your 401k to an IRA.

Having choices as to where to invest your money is particularly important in these economicly volatile times. When you leave your money in a 401k you can only invest in the options that they give you but if you roll your money over to an IRA the entire investment universe is yours. You can fund an IRA with any mutual fund, or bank CD, or insurance company annuity, or almost whatever you choose. You can even fund an IRA with real estate or gold coins if you want to. But if you leave it in your 401k you can only invest where they let you invest. I don’t know about you but I don’t like people telling me what I can and can’t do with my money. And your company may have great fund choices today but management may decide to go in a different direction tomorrow. I know of one of my clients whose boss changed 401k administrators 3 times during her employment. Each time she was given a new set of mutual funds to choose from. What if you don’t like the choices? What if management does a lousy job of picking your options? You’re stuck.

Here is another control issue for you. With an IRA you have no withdrawal restrictions. You are in complete control and you don’t have to ask permission to get at your own money. However in a 401k plan they may not let you have your money early even it is for something as serious as a personal hardship and you are not yet 59 1/2. And even if they do allow you access getting your hands on that money may take some time. Now if you need cash right away this could put added pressure on you that you just don’t need.

Last but not least IRA’s generally come with more help. Think about it, when you ask for advice on your 401k who do you have to call? Isn’t it usually your human resources department? Are you used to these folks going the extra mile to give you great advice and careful attention? Or do you sometimes gat a less than enthusiastic clerck that really has no interest in your financial success? When you roll over your 401k to an IRA depending where you place it you can often gain access to an advisor who works for you, not your company, and they will often help you customize not only your IRA but your entire retirement plan.

If keeping more control over how you invest or when you can 00004000 access your money is important to you than you will probably want to roll your 401k over to an IRA as soon as you are eligible to do so. Also if you think you may want to do some tax planning to help you stretch out your tax burden over multiple generations and allow your money to grow to it’s maximum potential and avoid estate tax if applicable than you may also want to roll over your 401k to an IRA as soon as you get the chance.

Frequently Asked Questions

  1. QUESTION:
    Withdrawing from my NY Life 401k?
    When I do a withdrawal out of my NY Life 401k, does anyone know how long it takes. And what percentage fee there is? Do I just request a withdrawal form from them?? Help.

    • ANSWER:
      If you are still with that employer, you need to check with the HR dept to see if you can withdraw anything.

      If you are no longer employed, you need to roll the 401k over to an IRA. If you are less than 59-1/2 years old, withdrawals are subject to a 10% penalty for early withdrawal. You also have to pay taxes. Expect 30% to 40% to be withheld from any withdrawal.

  2. QUESTION:
    Inheriting my dad’s 401K?
    I don’t know if anyone can help but here goes. My dad died suddenly about 6 months ago. I live in MA, he lived in NY. He left no will but had 2 life insurance policies (one his, one from his company) and a 401K. We were told all we had to do was send in a death certificate to each company and they would take care of the rest. Fast forward, we received a check from one of the insurance companies but the 401K people are saying that the rest of the that account goes to his “estate” because he had no will. This is even though our lawyer assured us that if there’s no will it goes to the next of kin (ie, his kids). Thoughts?

    • ANSWER:
      Anything that gets assigned to the “estate”, you would need to be assigned as “executor of the estate” which you would have to go in front of a judge for. Your lawyer should be able to help you through this process specific to your state also.

      Hope this helps some ~ good luck and sorry for your loss!!

  3. QUESTION:
    should I close my managed account?
    7 years ago I opened a brokerage account being managed by NY Life with 10k I had available. At the stock market peak in 2008 it was valued at about 15k, during the downturn it went into the 8′s. It started 2009 at 00 and is now at 12000.

    So in 7 years ive gotten a 20% total return on my money. I suspect im getting nickel and dimed to death on fee’s but its so hard to read the statement its impossible to know. In 2009 I only got a 15% return, this was well below the DJIA. My 401k outperformed this managed account without taking into consideration the tax breaks and matching monies.

    Anyway, given the state of the market during the time frame mentioned, should I move this money into another vehicle or leave it with this firm? Bottom line was 20% over 7 years.

    • ANSWER:
      I would take my money and run, but that is me……I happen to believe all these places nickel and dime one to death……..find out about any withdrawal penalties, also…….where they could take a nother chunk…..
      Why not look into something like premieretrade and start taking care of your own money and trading……..anyone can do it

  4. QUESTION:
    I have A friend who was offered a big time job but he needs a permit to carry a fire arm.?
    He was convicted of a serious felony in 1996 in the state of California. He now resides in NY. He is a private chauffeur in NYC. He has been off parole since 2006 and has remained impeccable every since he was released from custody.

    Now, he has been offered a job from an executive that has presented him a VERY nice compensation package: 175K/yr, medical, dental, vision, life and 401K plus a yearly discretionary bonus, just to state the meaty parts.

    Being that the compensation is great, he has been attempting to find out how he can get his rights reinstated for work purposes only. He’s not career criminal he just did something really dumb 14 years ago. Please advise and please be qualified to answer. State sources of your findings as well. Thanks.

    • ANSWER:
      An expungement will NOT restore his gun rights under California law (and that will keep the federal ban in place as well). The only thing that will do that is a full pardon from the Governor, and even that will not work if the felony involved the use of any dangerous weapon. Pardons are EXTREMELY rare, and he would do well to have the guidance of an attorney if he is going to try to get one anyway.

  5. QUESTION:
    About what can I expect to be looking at for a Tax return this year?
    I want to know what my Income tax refund would be if 2007 ended with my last paycheck, I a 21 year old SWM with a 7 month old child am in NY but am withholding 0-0 from my paycheck,
    1040

    gross pay 20,152.39

    Deductions
    Statutory:
    federal inc tax, 2248.93
    Social sec tax 1180.20
    Medicare tax, 276.01
    NY state income tax
    573.86
    NY SUI SDI tax 26.40

    Deductions
    Other:
    CNA addl, D&D 22.00

    CNA life, 35.20

    Dental, 128.70

    Health, 899.80

    Monthly Charity, 50.00

    Vision, 88.44

    3rd party W/H child support,
    1384.00

    401k, 1215.55

    Possible additional Deductible expenses,

    root canal + Crown,
    455 $

    about 2,000 in fuel to and from work,

    no student loans or mortgage,

    as of yet, no daycare expenses.

    based off of that information, what can I do to maximize my $ returned to me, and what may that amount be, rough estimates are welcome,…

    thanks :)

    • ANSWER:
      Get yourself a copy of Turbo Tax or a similar program and enter your info.

  6. QUESTION:
    How financially stable am I?
    Give your thoughts please.

    38, Single, no children
    Income: 0,000
    Job: Investment Banker
    Currently reside in New York
    1 House in Massachusetts,penthouse in NY,vacation home in Florida
    Lexus RX,and Mercedes Sedan

    Net Worth 3,800

    Total Savings 1,468 (Roth IRA, Small Investments, Money Market Savings Accounts, TSP (Government version of the 401K)).

    Total Debt: ,000

    I was born middle class. I was financially illiterate most of my life, racking up credit card debt of up to ,000. But strangely enough I always saved money, at one point having about ,000 in a saving account. It never occurred to me to put the money into something or to pay off the credit card debt. I was never told or taught that. I just paid the minimum credit card balances like my parents told me too.

    • ANSWER:
      If you are going to tell tales get your facts straight. Your income is to great to be eligible for a Roth IRA.

  7. QUESTION:
    How financially stable am I?
    Give your thoughts please.

    38, Single, no children
    Income: 0,000
    Job: Investment Banker
    Currently reside in New York
    1 House in Massachusetts,penthouse in NY,vacation home in Florida
    Lexus RX,and Mercedes Sedan

    Net Worth 3,800

    Total Savings 1,468 (Roth IRA, Small Investments, Money Market Savings Accounts, TSP (Government version of the 401K)).

    Total Debt: [FAQ-QUESTION].00

    I was born middle class. I was financially illiterate most of my life, racking up credit card debt of up to ,000. But strangely enough I always saved money, at one point having about ,000 in a saving account. It never occurred to me to put the money into something or to pay off the credit card debt. I was never told or taught that. I just paid the minimum credit card balances like my parents told me too.

    Finally about 2 years ago I saw this news report about Visa going public. I had no idea what that meant. I thought “who doesn’t know what Visa is? How could they go public?”. Had no idea it was about an IPO. I did some searching and since then I’ve been hooked on investment research. Investment research is one of my biggest hobby’s now.

    I’m mad at myself for missing out on so much for being so stupid with my money.

    But I paid off all my debt and now pay my credit cards off in full each statement, got an emergency fund, a Roth IRA, company matching on my TSP

    So, how am I doing so far?

    • ANSWER:
      for a person with 750k income, but only 953k net worth and 3 housing properties, I dont see why you say zero debt. The 3 properties must add to more than 3k value, which means that you must have a mortgage on them.

      unless one or two of the properties drops in value a lot, you are financially ok