Possible drawbacks to taking the passive route and staying invested in a 401k plan include the following:
- Limited opportunities—for example, restricted access to emerging markets and small-cap stocks.
- Hi fee and charge burden—particularly for 401k plans established by smaller companies.
- The practical difficulty of managing multiple accounts.
In contrast, by consolidating your 401k into an IRA, you can clear the path to a greater range of investment opportunities—for example, access to Exchange Traded Funds, mutual funds, emerging markets and individual stocks and bonds.
Legacy Planning? You may require a more unified approach
If you plan to leave a legacy you need to understand that this is a long-term affair and, like any long-term strategy, requires careful and holistic planning. This can be difficult and nigh on impossible if you have multiple 401k accounts.
However, by consolidating old accounts into an IRA you can develop a unified asset allocation strategy, for example, utilising international and US securities and small- and large-cap stocks. Such investment can more accurately reflect your legacy planning goals as well as your attitude to risk.
Consolidation is also likely to give you greater freedom to respond to your changing cash flow and strategy needs, allowing you to continually assess the breakdown of your portfolio so that you can rebalance it as and when the need arises. Consolidation of your 401k into an IRA may also simplify tax planning, not only for you but also for your beneficiaries following your passing.
For example, with a 401k, any assets that pass to the surviving spouse can only be taken as carefully calculated annual withdrawals; other nominated beneficiaries face even greater restrictions as they may be obliged to withdraw the entire account within five years.
In contrast, rolling over the account into an IRA gives beneficiaries the ability to make withdrawals on terms more in keeping with their actual needs and, where appropriate, to allow the fund to grow on a tax-deferred basis.
Blacktower in the US
Blacktower (US) LLC can help you consider your long-term investment goals, including the possibility of legacy planning for the future benefit of your loved ones or chosen charities. This type of planning can be complex, especially for US non-residents, so it’s vital to receive financial advice from a team that understands the inherent problems of 401k and IRA rollovers for expats in the USA.
Our specialists may be able to help you consolidate your retirement assets into a rollover IRA so that you can streamline the structure of your wealth. For more information, contact us today.
This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.
Investment advice and investment advisory services offered and provided through Blacktower Financial Management US, LLC. This communication is for informational purposes only based on our understanding of current legislation and practices which are subject to change and are not intended to constitute, and should not be construed as, investment advice, tax advice, tax recommendations, investment recommendations or investment research. You should seek advice from a professional before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.