Can You Do a Partial Rollover From a 401k to an IRA?
If your workplace retirement plan charges high fees or offers limited investments, consider rolling over your 401(k) balances into an IRA with an alternative custodian who provides alternative investments than what is offered through your workplace plan.
An incomplete rollover is not subject to taxes as long as you transfer funds between accounts that offer equivalent tax treatment.
Direct rollover is a process whereby money in one retirement account–such as your old employer’s 401(k)–is transferred directly into another retirement account like an IRA without taking possession of it and incurring taxes on it. It’s the ideal method for partial 401(k) rollover as it keeps your retirement savings intact while permitting them to continue growing tax-deferred until retirement time arrives.
An indirect rollover is another method to move funds between retirement accounts, although this one involves greater risks and requires more work on your part. With an indirect rollover, the financial institution distributing your distribution will send you a check with 20% withheld for taxes; then it’s your responsibility to redeposit all funds within 60 days or else pay income taxes and early withdrawal penalties as applicable.
As noted above, even with an indirect partial rollover it is still subject to RMDs once you reach age 59.5. Therefore if you are considering moving some or all of your retirement funds from an IRA for greater investing flexibility or simply due to low-cost options in your current plan it might be more appropriate to perform a full rollover rather than doing an indirect transfer.
Why choose partial 401(k) rollover?
A partial rollover is an ideal solution if you wish to diversify your investments but lack the capacity or liquidity for full direct rollovers. Diversifying portfolios helps protect against risk in times of economic downturn and can provide increased protection.
To successfully transfer a partial 401(k), it’s essential that you check with the custodian of the plan that allows this type of rollover and have your new IRA provider lined up and prepared to receive it. Furthermore, you’ll need to decide how much of your old retirement savings you want to transfer and which investments would work for those funds.
Alto can accept transfers from various providers and assist with partial rollovers into Alto IRA or CryptoIRA accounts. Before beginning a rollover, it’s essential that you understand the differences between traditional and Roth IRAs, including any guarantees and protections they provide. Reach out to us now – we are here to assist with beginning your path toward successful retirement!
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