Personal Pension 401(k) Rollover
- If you have a 401(k) from an old employer, it makes sense to roll it over into a new account. That could be an IRA 401(k) rollover or a Personal Pension 401(k) rollover.
- A Personal Pension 401(k) rollover provides the guarantee of an old employer pension with the flexibility of a 401(k).
As we move from job to job with increasing frequency, we’re accumulating 401(k) accounts with old employers. In this article, we’ll explain why it makes sense to roll a 401(k) over, what your options are, and what Blueprint Income can to do help.
What Is a 401(k) Rollover?
A 401(k) is an employer sponsored retirement plan that allows both you and your employer to save for your retirement on a tax-preferred basis. With a standard 401(k), all contributions are made pre-tax and grow tax-free until retirement, at which point distributions from your 401(k) are taxed. With a Roth 401(k), contributions are made post-tax and then no future taxes will be due, even when you take money out in retirement.
While you’re actively employed, the 401(k) that you and your employer are contributing to is managed by the employer. But, once you’ve left that employer, you have the option to move the 401(k) elsewhere. Here are a few reasons why you would want to do so:
- Get better fund selection: The 401(k) offered by your employer typically has a limited selection of funds, especially when compared to platforms like Vanguard, Fidelity, or Betterment.
- Lower your fees: Similarly, the 401(k) offered by your employer typically charges fees greater than those on larger platforms with more selection.
- Get a guarantee: Your 401(k) doesn’t offer any guarantees; it is simply an investment account. If you’re interested in guaranteeing money for retirement, you’ll need to move it into an insurance-backed option, like the Personal Pension or an annuity.
- Be able to contribute more: You can’t add money to an old 401(k). But, if you roll it over into a new account, like an IRA or a Personal Pension, you can continue to grow it.
What Are 401(k) Rollover Options?
If you’re younger than 59 1/2, your 401(k) needs to be rolled-over into another retirement plan with the same tax status to avoid incurring any withdrawal penalties. If you’re older than 59 1/2, you can simply start withdrawing money (and paying associated taxes). If you have a traditional pre-tax 401(k), then you’ll want to roll it over to something with the same pre-tax status. If you have a Roth 401(k), you’ll want to roll it over to something with Roth status. The following table summarizes your options:
|Original Account||New Account||What You Get|
|401(k)||Traditional IRA||Very similar to a 401(k), a Traditional IRA is a pre-tax investment account. Your IRA will be invested in stock & bond funds.|
|401(k)||Personal Pension||An individual private pension account that accepts 401(k) rollovers, the Personal Pension provides a guaranteed annuity retirement paycheck.|
|Roth 401(k)||Roth IRA||Very similar to a Roth 401(k), a Roth IRA is a post-tax investment account. Your Roth IRA will be invested in stock & bond funds.|
|Roth 401(k)||Roth Personal Pension||An individual private pension account that accepts Roth 401(k) rollovers, the Personal Pension provides a guaranteed annuity retirement paycheck.|
401(k) rollovers into Traditional or Roth IRAs are available on numerous websites, like Vanguard, Fidelity, and Betterment, to name just a few. When choosing your IRA provider, pay attention to fund selection, fees, and ease of understanding the information presented to you.
Personal Pensions are provided by us, Blueprint Income. While we are the only provider of a multi-insurer, flexible annuity account, there are many other providers of annuities out there. Most of these are offline agents and brokers.
Here you can see what a Personal Pension 401(k) rollover can get you in guaranteed income:
What Is a Personal Pension?
The Personal Pension is an annuity account. Instead of buying stocks and bonds, the money you deposit into a Personal Pension buys income from one of the insurers on our platform. Annuities are guaranteed retirement plans backed by insurance companies. They provide steady retirement income that’s guaranteed every month for as long as you live. The Personal Pension is very similar to an employer pension, except that the monthly checks you’ll get in retirement will come from insurance companies instead of your employer.
Personal Pensions and annuities are managed by insurance companies because they’re guaranteed. Whereas with a 401(k) or an IRA, you are managing all of the risks of your retirement yourself, with a Personal Pension, an insurance company is managing them for you and giving you a guarantee. The big risks they’re taking on for you are:
- Market risk: This is the risk that the stock market crashes when you are about to retire (or already in retirement). Because of the crash, you’ll have to sacrifice your standard of living.
- Longevity risk: This is the risk that you live longer than expected and run out of money as a result. It’s a new problem that was created by the (accidental) shift from pensions to 401(k)s.
By offloading these risks to our the insurers on our platform (like Guardian, Lincoln Financial, and other A-rated or higher companies), the Personal Pension 401(k) rollover is able to provide you with a guarantee of annuity income for life, no matter what happens in the market and no matter how long you live.
How Does a Personal Pension Compare To a 401(k)?
At Blueprint Income, we subscribe to the three-legged retirement stool philosophy. That is, you’ll be best off in retirement if you have all three of: Social Security, a pension, and personal savings. Let’s talk about each:
- Social Security: As long as you’re earning money and paying taxes, you’ll be eligible for Social Security benefits in retirement. You’ll get a monthly paycheck in retirement that’s calculated based on how many credits you’ve earned. Learn more here.
- Pensions: At one point, almost half of the private workforce received traditional defined benefit pensions that provided lifelong income. While employers aren’t offering them anymore, Blueprint Income – along with the insurers on our platform – is. Learn more here.
- Personal Savings: This one is easy today. As long as you have a 401(k), IRA, or comparable savings account, you’ve checked this off. With personal savings, you have the opportunity to invest as you’d like and have full control of that money.
So, a 401(k) meets the needs of the personal savings leg. It’s a way to invest in the market on a pre-tax basis where you can make all the investment decisions. But, it’s only one leg of the stool because it doesn’t provide any guarantees like pensions and Social Security. The riskiness of market investments cannot be overlooked. They have high potential for growth, but that potential comes at a cost – risk. With market investments, you’re always at risk of losing what you’ve saved. So, like everything else in life, don’t put something at risk that you’re not okay losing. (Don’t leave your backpack unattended, door unlocked, kid alone, etc.)
What this means for retirement? Invest safely and conservatively the money that you do not want to lose, i.e. the money you know you’ll need without a doubt in retirement. Do this with low-risk bond funds or through annuities and the Personal Pension which are similar in risk to a highly-rated bond but also provide longevity protection. A Personal Pension 401(k) rollover can be the foundation of your retirement while your future or other market investments give you growth potential.
How Can I Do a Personal Pension 401(k) Rollover?
Your 401(k) can easily be rolled over into a Personal Pension account. Click below to see what rolling over your 401(k) into a Personal Pension will guarantee you in annuity retirement income. After just a few years in retirement, you’ll have recouped your initial investment, and the rest will be profit. A $5,000 contribution is necessary to start an account.
From there, you can fill out the information to have one of our specialists follow up with you, or continue with the enrollment process on your own. Note that all future contributions are optional, but it’s always great to have a goal.
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