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Understanding the Tax Benefits of a 401(k) Rollover

When employees leave their jobs, they face several options for managing their 401(k) accounts, including cashing out, leaving the funds in the current plan, transferring to a new employer's plan, or rolling over the funds into an individual retirement account (IRA). Yieldstreet offers such IRAs, providing an opportunity to continue retirement contributions without interruption, while also potentially gaining tax advantages.

The process of rolling over a 401(k) to an IRA can help avoid certain taxes and penalties if handled directly and within specified time frames, such as the 60-day limit for depositing rollover checks. Moreover, specific tax benefits can apply, especially when rolling over funds that include company stock, or when converting a Roth 401(k) into another Roth account and adhering to the five-year rule. Additionally, standard tax penalties on distributions can be avoided if withdrawals are deferred until reaching 59.5 years of age.

Opting for a direct rollover to an IRA, like those available through Yieldstreet, can be particularly advantageous, helping to keep the retirement savings' tax-favored status intact and potentially minimizing future tax complications. Consulting a tax advisor or retirement plan custodian is recommended to navigate the complexities and ensure that the best financial decisions are made regarding 401(k) rollovers.

R. H.

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