- Here Are 3 Tips to Make Your Transition Easier -
* Tip #1: Are you happy with the amount of money your investment is earning in your 401(k)?
If you answer yes, then leave your 401(k) where it is.
If you answer no, then it's time to look into moving your 401(k) to a self-directed IRA.
* Tip #2: Keep your rollover non-taxable.
If you are rolling your 401(k) over to an IRA, then you'll definitely want to make sure you take the proper steps to make sure the rollover is non-taxable. One way to ensure the rollover is non-taxable is to do a "trustee to trustee" transfer. This means you tell your employer to directly transfer the investments in your 401(k) to your IRA.
If your employer happens to write you a check instead of doing a direct transfer, then you must deposit the entire check amount into your IRA within 60 days. BUT, if your employer withholds taxes from the check (which is often required when a check is written), the withholding is treated as a distribution to you as well - even though that money went to the IRS and not you! To avoid tax on the withholding, you must write your own check for the amount of the withholding and deposit it into your IRA within 60 days. You can then claim the withholding when you file your tax return for that year.
* Tip #3: Have a plan ready for your IRA
One of the key parts of every wealth strategy I create is velocity. Simply put, velocity means to constantly keep your money moving into investments so your money is constantly working for you. This is why you need to have a plan ready for your IRA so as soon as your 401(k) money hits your IRA, you are ready to put it to work!
One of the questions I get asked regularly about investing in IRAs is this:
Can Your IRA Invest in Real Estate?
The short answer is yes, but it's important to first consider how it impacts your wealth strategy and your tax strategy. The important question to ask is SHOULD your IRA invest in real estate?
