07-28-22-A

In Your Best Interest: When is it right to roll over your 401(k)?

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You might not know why you should care but as of July 1, financial advisors and their firms will face more stringent rules are it relates to retirement rollovers. This is due to the Department of Labor’s (DOL) new rules on how advisors handle their client’s retirement funds. Why is this important to know?

Under this rule, financial advisors just like us must provide their clients in writing specific reasons why a retirement plan rollover is in participants’ best interests. Think about it. You and your spouse may have had a few career changes or switched jobs leaving your 401(k) benefits behind. It’s not uncommon and you’re likely thinking about all the retirement funds that seem like a distant memory. Rolling this money over or moving into a different retirement investment vehicle may be in your best interest or it may not. Let’s start with the basics:

What is a Retirement Plan Rollover?

The DOL defines a rollover as:

• Taking a distribution from a 401(k) plan and transferring it to another 401(k) plan
• Taking a distribution from a 401(k) plan and transferring it to an IRA
• Transferring money from an IRA to a 401(k) plan
• Transferring money from an IRA to another IRA
• Transferring money from one type of tax-qualified or ERISA-governed account to another.

That’s a lot of money moving around, and these funds are important to your financial future. That’s why among other obligations, financial advisors must make recommendations that are best for the client, charge reasonable fees, and avoid ambiguous or misleading statements when giving advice. This means they should be held to the fiduciary standard of care. A standard we adhere to everyday.

Why Should You Care?

Let’s use the 401(k) to the IRA example. Specifically, advisors need to show you the differences and create an analysis that includes alternatives to the rollover, fees, and expenses associated with the employer plan and the IRA, whether the employer pays any share of administrative expenses, and the various levels of services and investments available through the plan and the IRA. Basically, a financial advisor needs to review all your options and show you why moving your money would be in your best interest.

“Specific” is the key word about why you should care about this new rule. Your advisors should provide specific reasons for your retirement funds to move based on your overall financial plan. This requires evaluating all the options available to you and knowing the ins and outs of your total financial picture. Ideally, your advisor should either already have a financial plan in place that they can fit this analysis into or gather information from you so they can review and then use that information to provide written recommendations.

Bottom Line

Our compliance ensures that recommendations around your retirement funds are always in your best interest, and that’s a good thing. It shows that you are proactively being provided with sound, individual advice that will benefit your unique situations.

Make a Seamless Transition with Treehouse Wealth Advisors

At Treehouse Wealth Advisors, our clients’ best interest is our top priority—always. We specialize in providing our clients advice on retirement plans, investment management, and other topics vital to long-term financial success. No matter your financial goals, we’re prepared to help you create the life you’ve always envisioned for yourself and your loved ones.

Don’t hesitate to reach out for a second opinion!

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Sources:

Garrison Point Advisors, LLC doing business as “Treehouse Wealth Advisors” (“TWA”) is an investment advisor in Walnut Creek, CA registered with the Securities and Exchange Commission (“SEC”). Registration of an investment advisor does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. TWA only transacts business in states in which it is properly registered or is excluded or exempted from registration. A copy of TWA’s current written disclosure brochures, Form ADV Part 1 and Part 2A, filed with the SEC which discusses among other things, TWA’s business practices, services, and fees, is available through the SEC’s website at: www.adviserinfo.sec.gov.

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