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Rollover 401k

Finishing Well / Hans Scheil
The Truth Network Radio
July 22, 2023 8:30 am

Rollover 401k

Finishing Well / Hans Scheil

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July 22, 2023 8:30 am

Hans and Robby are back again this week with a brand new episode! This week, Hans, Robby and Tom Griffin discuss rolling over 401ks and more. 

Don’t forget to get your copy of “The Complete Cardinal Guide to Planning for and Living in Retirement” on Amazon or on for free!

You can contact Hans and Cardinal by emailing or calling 919-535-8261. Learn more at Find us on YouTube: Cardinal Advisors.

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Your chosen Truth Radio Broadcast will be starting in just a few seconds. Thank you. Welcome to Finishing Well with certified financial planners, both Han Shyle and today Tom Griffin. And how fun because we've got a subject we've never talked about before and that is rolling over like a 401k into an IRA or 401b and there's all sorts of different things that can be rolled over as Beethoven was from what I understand.

But anyway, you know, as I was thinking about this and listening and watching the YouTube video that these guys did on this subject, Hans and Tom, you know, I was noted that this was a really intricate process of doing this but if something was being transformed and what was happening is that through this process you were having this one financial instrument turned into another financial instrument that would really benefit the person that has the financial instrument. And so as I was thinking about that process, I couldn't help but think what God had been teaching me recently about the idea of 40. You may know that 40 is a pretty significant number in the Bible, that it rained 40 days and 40 nights for Noah and Moses, you know, led the Israelites through the desert for 40 years.

You might be familiar with that and of course Jesus was out being tempted for 40 days and 40 nights as well and there's many, many, many more of those 40s when you study them. But what I want to relate that to is the process that God did with you and me, that did you know that a baby when it grows, it becomes, you know, fertilized, it takes 40 days before it becomes, before the heart begins to beat and then it's in the womb for 40 weeks. And so in that time it's in water and it's being washed in water and you may know that at the Bible that Jesus, the Word, and water are all synonymous. Jesus is the living water. He's also the Word as it was in John 1. And so it's interesting that as you're being formed in those 40 days and in those 40 weeks, you know, from one kind of a thing into another kind of an instrument so to speak, you know, Hans brought up the point that, you know, you work for 40 years from the time you're 25 to you're 65, many of us, and now you have this large balance in a 401k. And so all this, when it's washed in the Word, okay, like if we could take the process and wash it in the Word for 40 years or for 40 days or for 40 hours, all those things are becoming more what God had designed as he washes us in the Word. So with that all said, Hans and Tom, why would we ever want to roll over a 401k to an IRA or what exactly does that mean?

Tom, you know, go ahead and answer that. Yeah, and so most people, and if you're listening, this might be you, you have a retirement account that's sponsored by your employer. So that could be a 401k, a 403b, a 457.

I mean, they have all sorts of numbers for these accounts. But if you have an account sponsored by your employer, you're contributing money in, and then at some point, you're going to retire, or, you know, some point in the future, you might be there now. And what a lot of people do is they roll that money over to an IRA. And so an IRA is an individual retirement account and has the same tax rules that a 401k does. It has the same benefits, you can defer the taxes. And so the rollover is you are just moving the one account from the 401k to an IRA.

That is not a taxable event. So Rob, you asked, why would you want to do that? So some reasons that you might want to do this is you have more flexibility in terms of investment choices. So if you look inside your 401k, you have generally a series of mutual funds to pick from that you're limited to the what they offer. In an IRA, the sort of the world is your oyster is you have as many options as you can potentially think of. I mean, I don't want to get going down that route too much. But there are much many more options available in an IRA compared to a 401k.

So that's a big one. Another one is you might be hiring someone like us or someone, another financial professional that can help you with the investment. When it's in the 401k, you're really left to your own devices is you pick something you go with it and you really, the 401k custodian is not looking at what you're doing, your company is not giving you advice on what to do, generally. And so you're having to make those choices in the IRA, you could have someone who does this for a living helping you pick those options. And there's some other tax planning benefits of an IRA that you don't get in a 401k, specifically Roth conversions, you can convert money from a traditional IRA to a Roth. So I mean, there's lots of options and benefits inside an IRA that are just not available in a 401k. Well, it's also easier to get money out of an IRA and spend it and use it than it is a 401k, typically. And so a person that we have, I think of a lot of clients that come into us, and they have an immediate, they just retired, they're going to retire in a couple of months, and they need money out of this thing. And then they don't know how much to take out because they don't know what their social security checks going to be, or if they're going to delay it. And so what you can do with an IRA is once like, when we're managing it, it's very easy to set up that we say, we're going to send you $2,000 a month, or we're going to send you $4,000 a month. And or we're going to send you a big bunch of money all at once for the whole year. I mean, all of those options are available with an IRA, and they're much easier to do.

I've got a question for you guys. So take somebody young, like, you know, my daughter, she's a nurse, I know she's got a 401k through the hospital there. And she's, you know, making those deposits and but she's, you know, obviously in her early 30s. So if she rolls over, can she roll over part of that without closing the 401k, and they continue to deposit, you know, you know, that you don't want to close, obviously, her 401k, because she wants to keep making deposits in that is that something that's advisable?

Is that something that's doable? So generally, if you were still working for that employer, and you were under 59 and a half. So again, you want to check with your plan. But generally, this is how it works is you are not able to roll the money out while you're still working.

And you're under 59 and a half. Now, say your daughter chooses to go to a different she changes jobs or goes to a different hospital or a different doctor's office or whatever that might be. She now is no longer with that company. She is no longer an employee of that company.

She could roll that money to an IRA at that point. Does that make sense? Yes, absolutely. Okay.

So there that answered the question. Perfectly. Yeah, she could also do it tax free. But she has another option is she goes to another hospital that has a 401k. She could actually roll the money from the old 401k into the new 401k.

Okay. I mean, there's some rules on that. And she could also put it from the 401k into an IRA just to hold it long enough to get established at the new job and then roll it back into the 401k. And a lot of this is going to be dependent upon the rules of the 401k.

But we just want to make people aware that you can get money out of 401k. There's times when you almost have to get it out of there. And when you do that, you just want to make sure that you don't take possession of the money. Because that's where people get in trouble is she leaves the job.

And then she's sitting there. And then they she wants to say, What do I do with this? They say, Well, you can just cash it out. Okay, and then she's going to get into a bunch of taxes and penalties.

So that's kind of like what we do in our job is, is we advise people, first of all, whether this would be a good idea or not. And then if it is a good idea to get out of a 401k and into a, an IRA, typically the people that we're dealing with are older than your daughter. They're like 60, 65, 70, and the money's sitting there. And typically somebody that's that age, their friends or their people, their former co-workers or the people that are retired, a lot of them have rolled the money out and into something new.

But they're, they're really not the best people to run to for advice. Most people are aware when they get to be in their 60s, they're probably going to take this out of the 401k and put it into an IRA. So, so Tom, I'm curious, why would you not want to roll your money over?

Yeah, I mean, there are definitely some very clear reasons and times that you wouldn't want to do this. The first one that just jumps to mind immediately is if you retired, or you were let go or your employment ended and you're over age 55, but you're not at age 59 and a half yet. So somewhere between 55 and 59 and a half, and you leave, you're no longer working there. If the money is in the 401k, and you pull that money out, you are not subject to a 10% penalty. So one of the things about your daughter, if she were to pull that into an IRA, let's say she left work, went to a new job, rolled that money to an IRA, and then tried to make a distribution to herself, what she could do, she would have a 10% penalty that she'd have to pay on top of the taxes she owes, because she's not over 59 and a half. With the 401k, if you leave during that window of time, you can pull it out as early as 55, and not be not have that 10% penalty.

So we run into that a lot. If we have a client, and I'm dealing with someone right now, who's retiring early, they're retiring at about 57, they need this money to live off of. And initially, he was going to put it all into an IRA. And I said, Well, hold on, let's leave some money left in the 401k. So we can make distributions out of that, and not be subject to a 10% penalty, just saving him where he doesn't have that extra cost. And so that is a real big reason why you'd want to leave it in the 401k. After 59 and a half, if it's in an IRA, you don't have the 10% penalty. So if you're over that age, that's not a real benefit to you.

But again, if you're in that window of time, that's a real reason to not do it. Well, again, we want to remind you that this show is brought to you by And that, you know, of course, there's a wonderful, wonderful YouTube video on this whole subject, which you're going to find at the Seven Worries tab at And you just click on, of course, IRAs. And that is going to show you this video as well as the show notes on today's show. And there are lots of notes on this process, which when we come back, we're actually going to be going into great detail into how to do this, because I don't think you want to do this at home, because it could lead to all sorts of issues.

And the reason why I start off with the fact that it's a process is, you know, if it takes 40 years in the desert, you know, sometimes you want to work through things exactly how it's supposed to be. Of course, we want to remind you that's at, as well as Hans's book, The Complete Cardinal Guide to Planning for and Living in Retirement. And of course, all the contact information. Now you can get up with Tom.

Now you can get up with Hans. And it's all there at So we'll be right back with so much more on rolling over your 401k IRA and all that stuff. Investment Advisory Services offered through Brookstone Capital Management LLC, abbreviated BCM, a registered investment advisor. BCM and Cardinal Advisors are independent of each other.

Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. Well, welcome back to Finishing Well with Certified Financial Planners, Hans Seil and Tom Griffin. Today, we are having fun talking about rolling over your 401k 403b. There's a lot of numbers I don't know.

But, you know, Hans, you had another reason you may not want to do that. Yeah. So if you're in a 401k and you're one of these people like me, that you're going to keep on working. And you're going to keep on working beyond 70 and 73.

And, you know, God willing, I'm going to keep on trucking. And if that's so, I will not have to take minimum distributions out of my 401k as long as I'm actively working for that employer. So and we've run into several people that are in their late 70s and 80, and they're still contributing to the 401k, and they're not taking any minimum distributions out of the 401k because they're under the still working exception. Now, that doesn't mean never roll over your 401k. It just means that if you're somebody that's up there in years, and the money's sitting there, you don't need it, and you really don't want minimum distributions, because mainly you're still working, you don't need them.

You leave your money in your 401k and you stay with that employer, you're not going to have to take any minimum distributions. Yeah, absolutely. So, of course, we talked about that you may not want to try this at home. Can you guys kind of go into the process for us? Yeah, well, the 60 day rollover is a real trouble spot.

Okay. And it's been around the rules been around for a long time, but they toughened it up a few years ago, because people would abuse this, is they would take the money out of their 401k or out of their IRA. And they take possession of the money. And then they had 60 days to get it stuffed into an IRA or invested in an IRA.

And if they go to the 61st or the 62nd day, they are going to have to pay taxes and penalty, and the 10% penalty if they're under 59 and a half. And so people would do this to like, buy a house or something is they just I just need the money for a little bit. So I'm going to take it out. And then I'm just going to put it back after I get the loan done or whatever.

Yeah. If you mess this up, even a little bit, and people mess these things up all the time, because for starters, a lot of 401ks are they're required when they make a distribution directly to you, where you take possession of the money, they have to withhold taxes. So, you know, you're pulling out 100 grand. And you think you're going to get 100 grand, but you only get 80 grand, because they put 20 grand toward taxes. And then you get the 80 grand, and then you use it for the short term that you're supposed to use it or you want to use it. When you got to put it back, you got to put back 100 grand.

You can't just put back the net. So and there's also a rule that says you can only do one 60 day rollover in any 12 month period. So, you know, if people have multiple IRAs, or they got an IRA and a 401k, I mean, you can only do one of these in a 60 day period.

And my recommendation is you don't do any of these in a 12 month period is that you do them all, any rollovers or withdrawals from a 401k to an IRA to an IRA are just going to have a large amount are going to just go custodian to custodian, you never touch the money. Yeah, so can you explain what's custodian that that's critical, right? custodian to custodian? I'm gonna let Tom do that.

Okay. So I mean, this is something that people confuse all the time. So a custodian to custodian essentially means where the money is at, let's just use Fidelity, for example, your money sitting at Fidelity, and you want to transition or transfer it over to Vanguard. Just in this hypothetical scenario, you want that money to go from Fidelity to Vanguard directly, and never come to you where you could cash the check. So the one thing to be real clear on is you can do as many custodian to custodian or trustee to trustee is the same thing transfers as many as you want in a year, there is no one per 12 months, and a lot of people misunderstand that.

So that you can do as many as you want. The 60 day rollovers where you have taken possession of the money, you have cashed it in your own bank account, and then you try to put it back into an IRA, you can do it. But you have to do it, you can only do one per 12 months. And like Hans was saying, if it's coming out of 401k, they have tax withholding, there's all sorts of rules. So anytime you're moving money, dealing with 401ks, or IRAs, you want it to go directly to the custodian from the one custodian to the other, without you be putting the money in your bank account.

And that really solves a lot of potential problems that you might face. So when you when you go to do that, as you said, that the one custodian is going to be right where where the currently the 401k you have, but a lot of times you guys are the other custodian, but you're gonna, you're gonna send that to Schwab, or who, what was the other one that you had talked about? Fidelity?

Dan Gardner, I mean, there's all sorts of options there. We're not actually the custodian, we're the financial professional. So, and we've got lots of custodians we deal with. I mean, Schwab is one of them TD Ameritrade, Fidelity, and then we have all the insurance companies that write the MIGAs, and they write these income annuities.

And so we have a whole lot of custodians. And there would be another reason that you would maybe want to move money out of a 401k and into a self-directed IRA. And that self-directed IRA is going to be with an annuity company, where now they can produce an income for you.

You can't get that out of a 401k. So this is a sufficient reason for somebody to move part of the money to stick it in something that can send them a check guaranteed for the rest of their life or life. I think one, one thing that might help clear this up a little bit, if we just walk through an example, and when we have a client and we're wanting to roll money to somewhere else, sort of what are the steps in this process to take to make sure it's done properly?

I will say, if you have some question about this, don't try this on your own. When problems happen with IRAs and 401ks is when money is in movement, is when you're moving money somewhere. That's where the problem can arise. And if you cause a problem or there is a problem here, generally the result of that is the IRA being disallowed, all that money being taxable in that year.

And it could cause all sorts of tax problems. So don't try this on your own, especially if you have some questions about how to do it, but let's walk through an example. If we have a client, they're retiring, they're wanting to purchase, we'll use an income annuity, for example, they're wanting to purchase one of these to set up a future income.

How do we do this? And you can, you can use the same process than really any, wherever you want to move the money from. The first step is setting up an account with the receiving custodian, whoever's the money is going to end up with, you need to set up an account there first.

That just makes sense. You can't send money if there's nowhere to receive it first. So we want to set up that account that could be applying for an annuity, that could be opening an IRA at Fidelity or Schwab or whatever custodian you want to use. Sometimes it's at your bank. So you open an IRA that's going to receive the money.

That's the first step. The second step is we contact the 401k or if it's at an IRA, the IRA, wherever the money currently is, you contact them next. We're going to use the 401k in this example because this is most commonly what we're doing is you reach out to the 401k. Most times you can call up the 401k, and we do a lot of this, or we have a three-way call where we're on the phone with you.

We call the 401k custodian with you on the phone. We introduce ourselves. We tell them that we're wanting to do a rollover. And they say, okay, they'll talk to the client, which will be you, and make sure it's okay to talk to us. And we tell them sort of here's what we want to do. We want to roll this money to this insurance company. And so they'll go through, they'll ask some questions, you know, what's the account number? How are we sending this? And they'll go through and get some information there. And they'll say, and they'll hit go. And with 401ks, most 401ks, they generate a physical check to transfer money.

They're still sort of stuck in the past. They're not transferring money electronically. They write a check and send it to where it's going to go. One quirk that you run into with a lot of these 401k companies is they have a rule that the check has to come to the address on file of your physical address. You say, wait a minute, you told me, you know, five minutes ago that the money comes to me, that's a 60-day rollover. I don't want to do that. And so how we want the check made out is the name of the receiving custodian, so the insurance company, SBO, and then your name.

So for the benefit of. So the money, even though you're actually getting a check, there's no way you could cash it because it's made out to the other custodian. And then you will turn around and mail that check to the other custodian.

So that is still considered a trustee to trustee transfer or custodian to custodian transfer. And so it's okay if you actually get a check in the mail, as long as it's not made out to you personally. And so you'll get the check, you'll then overnight it.

I would recommend using overnight so you can try to have a tracking number. You can keep track of this money. You send it to the receiving custodian, they cash it, they apply it to your policy, and then you're good to go. And so that's sort of the process of what you'd want to do. It doesn't have to be an insurance company.

That could be another, just a brokerage account, an IRA somewhere else. I mean, it doesn't really matter, but that's the order of steps you'd want to take. Right.

And we only have about a minute and a half left, but Hans, you want to cover real quickly, like there are strict rules for you guys on this that have to be applied. Well, yeah. I mean, the Department of Labor put in a regulation for any financial professional that touches an IRA.

And by touching, I mean, we're moving it from one place to another. We've got to act in the client's best interest. So it's very similar to fiduciary, but it is not fiduciary.

And it's a regulation and it falls on any financial professional that's really messing around with IRA money. We have to document how this is in the client's best interest. We always want to mention that the show is brought to you, because unfortunately we've run out of time before we run out of show as always, but you always want to go to Cardinal Guide to see how do I get up with Hans?

How do I get up with Tom? Because you can see that in order for them to even do any kind of rollover, they're going to have a document that shows exactly how that's in your best interest. And again, to get into those discussions on your financial plan of all these different ideas, it's all there at, as well as Hans' book, The Complete Cardinal Guide to Planning Foreign Living in Retirement. And of course, we always want to mention these seven worry tabs, which have like today's show under IRA. There's going to be this YouTube video that goes into great detail on all this idea of rolling these over if this is of more interest to you and you want to know the show notes are all there. It's all there on the seven worries tab at As always guys, great show. Thanks so much.

Thank you and God bless you. The opinions expressed by Hans Schile and guests on this show are their own and do not reflect the opinions of this radio station. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such.

Any statements or opinions are subject to change without notice. Investments involve risk and unless otherwise stated are not guaranteed. Past performance cannot be used as an indicator to determine future results. Any strategies mentioned may not be suitable for everyone. Information expressed does not take into account your specific situation or objectives and is not intended as recommendations appropriate for you. Before acting on any information mentioned, please consult with a qualified tax or investment advisor to determine if it's suitable for your specific situation.

Finishing Whale is designed to provide accurate and authoritative information with regard to the subject covered. Investment Advisory Services offered through Brookstone Capital Management, LLC, abbreviated BCM, a registered investment advisor. BCM and Cardinal Advisors are independent of each other.

Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. We hope you enjoyed Finishing Whale brought to you by Visit for free downloads of this show or previous shows on topics such as Social Security, Medicare, IRAs, long-term care, life insurance, investments and taxes, as well as Hans' best-selling book, The Complete Cardinal Guide to Planning for and Living in Retirement and The Workbook. Once again, for dozens of free resources, past shows, or to get Hans' book, go to If you have a question, comment, or suggestion for future shows, click on the Finishing Whale radio show on the website and send us a word. Once again, that's This is the Truth Network.
Whisper: medium.en / 2023-07-22 10:26:28 / 2023-07-22 10:37:50 / 11

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