I quit a few months ago and have decided to cash out my pension as a lump sum. I want to minimize my taxes and I’ve heard you can roll it into the 401k (not sure if this is before tax/after tax/Roth). Is this the best option?
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Casino...red or black
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Non-fungible Tokens.
What I heard.
You have 4 options. 1. Cash it out as income to pay whatever the tax bracket you're in (and potentially penalty depend on your age) and deposit it into your bank (not recommended); 2. Roll it tax-free into EM 401K = Voya = most terrible; 3. Roll it tax-free into an external traditional IRA account (e.g., at your bank) and figure it out to roll over into Roth in portion when your tax situation is favorable; 4. Roll it directly into Roth paying income tax. I did #3 and plan to roll it into Roth in portion when tax situation is favorable. Be aware of the Roth 5-year rule.
The common assets return is wrong on the Voya site. It says first quarter returned 2.85%, but it was actually an annualized rate of 6.11%. Still good for common assets, but not 11+%. Call Voya if you don’t believe me.
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You should definitely transfer it to an ETF Gold Banking Deposit Fund (ETFGBXDF) ; that way you can be sure without having to think about it.
Common Assets in the Voya Savings Plan is quite attractive with a 2.85% return in just the 2022 1st quarter. Over 11% return annualized with no risk. Beats the inflation rate. High inflation equals high Common Asset return.
Me personally, I would roll into an IRA outside of your new company 401k in order to diversity the management of your funds. As for Roth versus non-Roth, if you can afford the taxes now, do Roth since you don’t pay taxes on the earnings. Non Roth you don’t pay taxes now but you do when withdrawing including the earnings. Roth also doesn’t have Required Minimum Distributions when you’re 72, which is to your advantage. RMDs can make your tax situation a nightmare depending on your holdings.
You also have the option to put it all into a non Roth now then do Roth conversions in smaller increments each year to allow yourself to stay in your same tax bracket each year.
Best option is to talk to a Fiduciary as they will give you sound advice without charging you.
Agree with previous post. Talk to a financial advisor or do some research to see what is best for you. For the vast majority of people, rolling into a traditional IRA is the better option. Taking it as cash (not rolling it) may put you into a higher tax bracket assuming this will be on top of your earnings for the year.
You can take the cash and pay out the tax, roll into a Roth (unless tax rules changed) and pay tax then avoid tax on the gains, or roll into a traditional IRA and maximize capital gain at the expense of paying tax on all gains when you withdraw and having required minimum distribution when you retire. Everyone has different personal needs that makes different strategies more beneficial. I'd suggest talking to a financial advisor or doing some research to see what is best for you.