Client called me to tell me that he had to roll all of his money out of his 401K into another retirement vehicle this year. He is going to be 70-1/2 this year. Is this normal?? I know that regular distributions need to be withdrawn once you reach 70-1/2, but have not heard of having to roll it all over into something else. Can any of you enlighten me??? Also client is asking me for suggestions. I advised him to contact a financial advisor for recommendations. Would any of the California preparers know of a good financial advisor in Northern California?
-
-
While the tax laws do not require a total withdrawal of funds from a 401K at 70 1/2, sometimes the employer and/or custodian of the plan does. Some have a minimum amount that can be left in their plan. ( They don't want the expense of administration). It would depend on the plan documents and they may have specified that he take a distribution of the entire amount. It is up to him to roll it over, but they may have given him the option of a direct transfer. Sometimes they just do it because they don't know the rules.Last edited by Burke; 09-23-2008, 05:56 PM. -
whatever you do or recommend,
Talk him OUT of rolling it over into an annuity. And I think others will agree on this point.Originally posted by peggysioux View PostChEAr$,
Harlan Lunsford, EA n LAComment
-
And others will disagree
but that wasn't her question.Originally posted by ChEAr$ View Post
1st, don't send him to a financial adviser. Peggy, he came to you because he wants tax advice, not investment advice.
Simply moving the money from the 401k to an IRA does not satisfy the RMD requirements. He must take the RMD on the prescribed schedule from the IRA (or any combination of IRA's and other qualified plans).
Now, if you don't feel comfortable advising him on these matters I would suggest calling several local EA's or CPA's to see who would be willing to meet with you and the client (for a fee of course) to recommend the proper course of action for your client. You can say something to the effect of "I don't specialize in qualified plans, but my assoicate Mr./Mrs X does. Do you mind if I bring him/her in to provide counsel on this situtation?"Comment
-
But they DO want...
John, more often than not, even though they come to you for taxes, they DO want investment advice too. There is a growing disenchantment with what all is out there. Get ready, because most of your customers' 401k plans have taken a real nosedive in 2008.Originally posted by JoshinNC View Post
Peggy, find an investment advisor locally you can trust. Not all brokers are fee-greedy, not all bankers are fee-greedy, not all lawyers are fee-greedy. Many of them just want to make a comfortable living and at the same time do well for their customers. The big problem is many of these people work for large institutions, who by policy govern the practice of plunging their hands into peoples' pockets. Find someone independent.Comment
-
I think Burke, Josh and Snagg all gave good advice. It is most likely the 401k plan documents which require your client to rollover his 401k assets to a IRA. Under the current market conditions this is probably advisable anyhow. So that your client retains more control and power over his/her investment choices and the like.
Chear$ more often than not I find your opinions to be sound and well thought out,you are one of the greats this board has to offer. Your comment about annuities however was not one that I would agree with. Not all annuities are bad and not all clients need one. But taking the last couple of months into account the few clients I have placed in them are now sleeping much better than others. The fact is that a client should think long and hard about any investment and truly understand the +/- of their choices. Once everything is laid out they should choose the best investment vehicles which meet their needs, risk level and the like.Comment
-
401k
Client actually came to me not for tax advice, but hoping I could direct him into what type of vehicle he could roll his 401K into. I said there are any number of IRA's that he could roll into and that he should maybe speak with his banker regarding the available vehicles, but he thought that I might be able to give him investment advice. While I can give him tax advice, I am not qualified to give him in-depth investment advice. He knows that he is required to take out the RMD, but just unsure where to safely put his money at this time. If I don't personally know of a good financial advisor, should I just again suggest he speak with his banker?Comment
-
Warn him that if he speaks with his banker, they will almost certainly steer him to the bank's brokerage department within a few minutes. It's the classic bait & switch - people think they're dealing with their banker when they have been shifted over to the in-house brokerage department with all the attendant baggage. Of course, they will have him sign all the usual disclosure forms which serve only as a CYA for the bank, but the fact is he will have been duped into thinking he's dealing with his trusted bank when in fact he's probably being hustled by the brokerage dept. Buyer beware...
I'd tell him the smartest thing to do, especially with all the insanity in Washington & Wall St at the moment, is roll the money in an FDIC insured Money Market IRA at a bank, park it, and spend the next 6-12 months learning a little about investing. (If his 401k balance is over $250K, he should use more than one bank.) Once he's satisfied he has some understanding of what he is doing, then he can choose a reliable financial advisor and see if there are better options. The downside of this is he MAY miss out on some higher earnings on his principal. The upside of this is that he will still HAVE his principal (plus 2-3% or so) and hopefully know a little more about what he is doing than he does at the present.Last edited by JohnH; 09-23-2008, 02:18 PM."The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
-
Cfp
Peggy, find an investment advisor locally you can trust. Not all brokers are fee-greedy, not all bankers are fee-greedy, not all lawyers are fee-greedy. Many of them just want to make a comfortable living and at the same time do well for their customers. The big problem is many of these people work for large institutions, who by policy govern the practice of plunging their hands into peoples' pockets. Find someone independent.[/QUOTE]
Snagg....As an independent CFP at an RIA firm, I wish you were in charge of my marketing dept. Best statement I have heard in a long time.
As for the question, Why would you not consult a local CFP and go with the client to the meeting? Could be a great referral source, if the CFP doesn't do taxes. My firm referred tax clients to a few CPA firms until they hired me. After the initial consultation, you will be able to tell if you have an honest practitioner or not. Look for a fee based or fee only planner.Comment
-
Cfp
I was given a name of someone who handles 401K's, but in talking with him, I found that he was not a CFP, but was licensed to sell investments and insurances. He named off several different licenses that he had and he said he was fee based. He is in California and said that he had to have annual continued education like an EA or a CFP. If he does not have the "CFP license", should I inquire elsewhere?Comment
-
Depends
Find out his designations. He could be a ChFc or RFC. CFP is the toughest to get, but not the only one out there. I'm just biased. Most designations require CPE's. Get a feel for him. Consultation with you should be free. I have never walked away from a consultation and felt it a waste of my time. I you like them, could be a lasting referral source. If it doesn't work out, you know where you should not send clients too!Comment
Comment