What to do with your Vestwell 401(k) if you're leaving your company
I’m leaving my company. What options do I have for my Vestwell retirement plan?
Wherever life takes you, we’d love to be part of the journey! So while your retirement funds are yours to do with what you’d like, here are some things to know.
Why should I consider keeping my plan with Vestwell?
There are a number of benefits to leaving your 401(k) to grow with Vestwell:
- Lower fees. In general, Vestwell’s fees are below industry benchmarks, and Vestwell does not receive any indirect revenue for services provided to your plan. So not only are our fees low, but you can feel confident knowing that we are not conflicted. Future plans may have higher fees, and those are assessed against your account, which could significantly reduce your overall savings. To compare, ask for a fee disclosure from your future provider. You can find your Vestwell fee disclosure anytime under My Plan/Plan Notices.
- Better investment options. Future 401(k) plans may offer a limited menu of investment options or require you to invest in employer stock. The Vestwell Platform offers a diverse array of funds, model portfolios, and target-date funds. And don’t worry, if you have no idea what that means, just reach out to email@example.com we’ll walk you through it!
What else can I do with my investments?
- Cash-out. Though tempting, cashing out your 401(k) plan comes with taxes and penalties, as the funds will be treated as a taxable distribution. As a result, it would be subject to a 10% penalty if you are under age 59 1⁄2. Additionally, the taxable portion will be added to any other taxable income for the year and can move you into a higher tax bracket.
- Rollover into your new plan. While there are benefits to consolidating accounts, it’s important to do your research. High fees are prevalent in this industry and can often be buried in legal jargon or disguised in hidden fees. Vestwell prides itself on transparency, and if you’re having trouble with that same transparency from a future provider, just ask! You have the right to understand what you’re paying for and what you’re getting in return.
- Rollover to an IRA. Please note that you can only contribute up to $6,000 in pre-tax deferrals per year ($7,000 if you are 50 or older) with an Individual Retirement Account or Individual Retirement Annuity. However, rollover dollars do not apply to that limit. Additionally, investment options are determined by the IRA provider, despite their lack of fiduciary duty to select the best investments for you. Lastly, please note that IRAs do not provide loans and the amount rolled over will become subject to the tax rules of an IRA.
- Rollover to a Roth IRA. If you roll over Pre-tax 401(k) money to a Roth IRA, this would be a Roth conversion and will be taxable. If you roll over Roth 401(k) dollars to a Roth IRA, then it is unlikely that any taxes will apply. (The 10% additional income tax on early distributions will not apply if you are at least age 59 1/2 and as long as you do not take the amount rolled over out of the Roth IRA within 5 years, counting from January 1 of the year of the rollover. If the start date of both the Roth 401(k) dollars and the Roth IRA has been tracked then the 5-year rule starts with those dates).
Ultimately, Vestwell is here to help you meet your retirement goals, but it is up to you to decide how to treat your funds. Should you have any questions or if we can assist you in any way, reach out to firstname.lastname@example.org.
If you would like to request a rollover, please see our article "How Do I Start a Rollover?"