It's opportunity time. Don't just roll over. In this episode,
I'm going to answer the question "What happens to your 401(k) when you change
jobs?" This is an opportunity. Don't stress out get ready to learn what you
can do that is far better than just rolling it over to the new employers 401(k).
I'm Doug Andrew. And I've helped people retire comfortably now for more than four and a half
decades. But I'm very passionate about educating people like you. And so, there are many times in
our economic circumstances where people maybe lose their job or they've been cut back or they change
employers. I'm recording this video in the end of the year 2020 when many people were affected
by covid 19 pandemic. And so, a lot of times people go, "Well, golly. What happens to my 401(k)
at m previous employer if I change jobs and move to the new one? What should I do? What happens
to it?" So, many times, they don't realize there's a danger of leaving it with your old
employer because you lose control. They could not manage it wisely or if it's tied to the company's
success or stock, you don't want to leave your money under the management of a former employer
in most cases. You want to take control. So, most people think, "Okay, can I roll it over
into a new 401(k)?" Yeah. Maybe your employer will allow you to do that. Or you roll it over to an
IRA and you own an IRA. Yes, you can do that. But I don't think that's the smartest thing to do
because you want to eliminate the dangers as soon as possible of taxes going up, inflation, eroding
away the purchasing power of your dollars and market volatility if it's invested in the market.
Here is your opportunity to get rid of it, to get the taxes over and done with. And people go,
"Huh? Well, I might be penalized 10%." Get ready. I'm going to show you how we have offset the tax
and the penalty many times getting the money rolled out, not rolled over. So, when I say that
you're fortunate, there's opportunities to be able to do something with money that was in a
401(k) with your former employer, what are some of the triggers uh that would alert you to the
opportunity? So, as you change employment, I've already said. You know, I wouldn't leave my money
in the former company's 401(k) because I lose control but instead of rolling it over to a new
401(k) or to an IRA, I think you ought to look at your tax situation. Many times when people
change jobs, they may suffer a little bit in income. Their income may be lower that year. So,
that's a trigger. Whenever you have less income like in the year 2020 with the covid-19 pandemic,
many people suffered an income and I said, "Hello? It's time to maybe access some money out of your
IRAs and 401(k)s and get the taxes over and done with in your current tax bracket" because
Joe Biden's going to come in and raise taxes and you have less income. You have more room
between this income and this income in in a tax threshold to take money out and you will be in
the lowest tax bracket you will likely ever be in. Because you're currently let's say in a 22%
bracket and you're gonna go up to 24 or 28 or 30. Why do you want to wait? Get the taxes over
and done with sooner than later. Your income is lower, your tax bracket is lower. These are called
triggers. You analyze every year. I would sit down with many of my clients and we would do tax
planning before the end of the year. And we may end up accessing an extra 20, 30,
40 thousand out of their IRAs and 401(k)s and get the taxes over and done with sooner
than later. During 2020 with the covid 19 hardship withdrawal, you could access 100,000 without a 10%
penalty. Oh, I told many people that they ought to consider that from a tax
standpoint you avoid the 10% penalty if you're under age 59 and a half. But you're going to get
rid of the tax liability sooner than later rather than continuing to postpone, delay to higher taxes
that a Biden administration has promised? Hello? So, hardships --accessing money before the age of
59 and a half without penalties. There's all kinds of opportunities. Otherwise, whenever you change
jobs, don't necessarily think that the best strategy is to continue to postpone delay
and roll it over. Analyze "Is there a reason why I should take advantage of today's tax rates
instead of continuing to postpone?" But the key is what you do with it after you satisfy the tax
where do you put the after-tax money. That's the key. Free yourself from the IRA 401(k)
tax trap. How? Perform a strategic roll-out, not a rollover. So, how do you do this?
This is actually up to a 3-part strategy that I came up with years ago. Part 1 is to strategically
schedule your withdrawals out of your IRAs and 401(k)s over (let's say) a 5-year period (maybe
longer) based upon your tax bracket any special circumstances during a given tax year. But
generally speaking, my goal for most people is to get the taxes over and done with sooner than later
over a 5-year period. We're trying to basically make sure that after 5 years, you don't have to
pay tax anymore because of where you reposition the after-tax money. So, a strategic rollout,
first of all, you're getting the taxes taken care of sooner than later over a 5-year period
strategically based upon the tax brackets, the levels, your income, a lot of factors. Part number
2 in the strategy is to take the net after-tax monies from the rollout each year, reposition
that into something that's going to be tax-free from now on. Now, most CPAs and tax attorneys go,
"Well, what's tax-free?" And that's why they come and enroll in advanced continuing education and
learn about my favorite vehicle that I call The Laser Fund that allows you to accumulate access
and transfer your money totally income tax-free. It actually will blossom at the end of the day,
thus reimbursing you uh sometimes many fold for any taxes that you did incur during the
rollout process. So, you, your spouse, your kids, are not out anything at the end of the
day. You actually come out ahead. So, you're taking the net after-tax money in phase 2. And
you're repositioning that in accordance with IRS guidelines under what is called the Tamra
tax citation where you cannot fund a Laser Fund any faster than 5 years. Or technically speaking,
4 years in 1 day if you put in a lump sum of the first day of the first year. Then the first day
of the fifth year which is actually 4 years and 1 day later, you have complied with the tax citation
Tamra --technical and miscellaneous revenue act of 1988. So, that from that point forward,
any money you access sooner or later out of the laser fund is totally income tax-free.
And when you ultimately pass away, it will blossom and transfer income tax-free. Now,
the third part of the strategy sometimes we can't apply. But in any situation that I can, I will
employ this. And it's to offset some or maybe all of the tax incurred during the 5-year or longer
roll out process by creating or resurrecting new tax deductions that maybe you were killing,
okay? This may be in the form of real estate that maybe you were owning it was rental income
properties or whatever. And you thought the best way to handle that is to hurry and pay it off and
you're killing your tax deduction. Or maybe it's your house. So, I've had many people refinance and
re-leverage or acquire new real estate properties, leverage them and bring in new deductions because
of the mortgages. Or resurrect deductions by refinancing those properties. And I'm going to
give you some examples of this. And I've helped many people transfer a quarter of a million,
3 quarters of a million, 1.2 million out of their IRAs and 401(k)s. Sometimes with no tax
consequence because I offset the tax by creating new deductions on their tax returns. The IRA,
401(k) rollout is showing up on the front of their 1040 tax return. But under deductions ofttimes on
schedule A or schedule E of their real estate, I'm creating all kinds of new deductions that they had
been killing. Or I'm acquiring new properties. And people are able to get the money out with
the least tax impact. So, I'm going to share with you some examples of how this works. So,
as we analyze, "Golly. What happens to a 401(k) when you change jobs?" Hopefully, you've gained
insights into okay you don't want to leave it necessarily with your former employer because you
give up choice and control. Do you roll it over? Well, if you do you can roll it over to an IRA.
But I would not necessarily leave it there waiting to avoid a 10% penalty till you're 59 and a half.
There may be opportunities to access that money before that and avoid the 10% penalty. Or you
can offset the tax and the penalty off times even if you're under the age of 59 and a half.
You may want to learn more about this by studying some of my books. But let me give you an example.
I have had many couples who maybe had 250,000 in their 401(k)s or IRAs. And they thought,
"Should I keep it in there? Should I postpone? Could I... Should I keep deferring until I am 70
and a half?" Now, the age is 72 before you must start accessing money in order to avoid a 50%.
Well, I usually say, "You know what? You probably ought to get that out sooner than later
if you think future taxes are going to be higher. And even though it's painful
and these couples go "I have to pay tax." Well, you're going to pay it sooner or later.
Let's get it over and done with. It's sort of like the old fram an auto light commercial. If you
remember, they used to hold up an oil filter and an automobile mechanic would say, "Now, you can
either pay me now and change your filter or you can wait and pay me later and I'll replace your
engine." You wouldn't believe how many people opt to postpone and replace their retirement engine.
Don't do that. So, get the taxes over and done with. Reposition the net after tax into something
that's going to be tax-free. Recapture the gains on a tax-free basis. You'll be far better off
than continuing to compound the tax problem by deferring and deferring and procrastinating.
If you want to read and study about examples of this, I would recommend you study actual stories
in my most recent bestselling book called The Laser Fund. Here's how you can get your free copy.
You can claim your free copy by going to Laser Fund. It's here on the bottom
of the screen. Contribute a nominal amount towards the shipping and handling. I'll cover
the rest of that cost and then I will pay for the book and this will begin to empower
you. And you can also be notified about our other educational events. And there's
additional resources to listen and learn and watch and learn. But here's to your brighter future.