Financial Advisor Tim Hayes
401k Roll Over • Get Rollover Advice in Boston, Massachusetts
I am an Investment Adviser Representative at Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser (RIA) based in Fairfield, IA. I am also registered with Cambridge Investment Research, Inc., an independent broker-dealer with over 3,000 registered representatives nationwide.
Most clients pay fee-only or an hourly rate. The size and complexity of the client’s wealth management and financial and retirement planning determine that fee
I’ve held an industry securities registration for 30+ years and am subject to SEC and FINRA oversight.
Your 401k is one of the most significant assets you own. Deciding what to do with it when you leave your employer is a critical financial decision.
To help with this decision, the U.S. government has been on a ten-year quest to develop a regulatory scheme that protects retirement plan participants. While many of the rules involve advice, when someone is in the plan, a primary focus is the direction a financial advisor provides on whether you should roll your 401k to an IRA.
The Fiduciary Rule
The first such attempt happened in 2010 when the Department of Labor (DOL) proposed sweeping changes to the retirement landscape with their so-called Fiduciary Rule.
The proposal required financial advisors to act in the retirement plan participants’ best interests, including advising someone on whether they should roll their 401k into an IRA.
It barely got off the ground before the 5th Circuit Court of Appeals canceled it on March 15, 2018, when it ruled that the Department of Labor overstepped its bounds.
In addition to sweeping bank reforms, the 2010 Dodd/Frank bill tasked the SEC with reviewing the two regulatory silos that financial advisors come under to merge the two into one possibly.
You might be surprised that there are two silos. The first is for broker-dealers who worked under a suitability standard. The second is for investment advisors who, in addition to suitability, are fiduciaries who owe their clients a higher loyalty.
The New Rule from the SEC
Beginning June 30, 2020, broker-dealers will operate under a new standard called Regulation Best Interest. This requires brokers to better align their interests with those of their clients by eliminating conflicts of interest, such as proprietary product requirements, sales quotas, or sales contests.
Registered representatives (brokers) will be called financial professionals. Any advisors who are fiduciaries can continue calling themselves financial advisors.
The DOL Resurfaces
The financial industry had just adapted to the new SEC rules when on July 7, 2020, the Department of Labor issued a final rule to close the circle, begun by the 2010 Fiduciary Rule and the new SEC best interest rule.
The DOL rule brings back the five-point test to determine if an advisor is a fiduciary.
- The financial advisor must render advice as to the value of securities or other property;
- The advisor must do so regularly;
- The advisor must do so under an agreement with the client;
- That advice will serve as a primary basis for the client’s investment decisions; and
- The recommendation is to be based on the particular needs of the investment or retirement plan.
It also withdrew guidance from the so-called Deseret Letter. The DOL had opined that rollover recommendations were not fiduciary investment advice in that guidance.
The DOL sent the final rule to the Office of Management and Budget in December. Because of the administration change, the rule will be put on hold and eventually modified or canceled.
Should this be 2021? If not, please change the verb tense of the rest of this sentence from future tense to past tense. Thank you.
So Back to the Question: Should You Roll Over Your 401(k) to an IRA?
As you can see, the government is concerned that people that roll a 401k to an IRA end up paying higher fees. And if you have a plan with institutional share classes, work with a financial advisor, and move your plan to an IRA, your costs will likely go up.
But many 401k plan participants work for employers that do not offer institutional pricing nor a great fund lineup. For them, they can roll over without incurring higher expenses and maybe end up with better choices.
There are other reasons to do a rollover besides costs: convenience, not having to deal with the plan for withdrawals, beneficiary changes, or other housekeeping changes.
Also, the skill set involved in growing your accounts is different from providing income. Maybe you will find a financial advisor well-schooled in bonds, annuities, dividend stock funds, the tools needed to generate retirement income.
The advisor could also provide additional services such as estate planning. They can keep you abreast of vital rule or law changes, such as the recent change that made having a trust as a beneficiary in a retirement account less appealing.
How Do I Request a Retirement Plan Distribution?
If you decide to roll over your 401k to an IRA, the best way is to do it directly, meaning that the account should go directly from the 401k to the IRA.
If you receive the 401k withdrawal, the 401k plan must withhold 20% for taxes on any eligible rollover distribution. The client will have 60 days to roll that distribution into an IRA; however, if they don’t have the 20% available, then the amount withheld for taxes on the gross distribution will become taxable.
The plan sells the funds and sends over the amount as cash when you do a direct rollover. If you initiate a rollover today and have funds in the stock market with the stock market down some 20%, you will be selling with prices.
The rollover can then be invested back into the stock market when the check is received at the IRA. However, reviewing your retirement allocation as you move closer to retirement is a good idea.
401k Rollover Directly to an IRA
Most 401k plans have their own rollover process. Depending on the plan, either a form or a phone call may initiate the transfer. Some plans mail the check to the client. You want to make sure that a check is made out to the client’s new IRA FBO. That way, the plan is not required to withhold 20% for taxes.
If you receive a check, there is no need to sign it before you send it to the IRA custodian, as it has already been made out to that custodian. The following year, you will receive a 1099R from your former 401k plan letting the IRS know that you rolled over your retirement plan distribution.
What If I am Working With a Financial Advisor?
Any rollover advice falls under new requirements when working with a financial professional. First, the advisor should make a reasonable effort to determine the costs and fund lineup in your 401k plan. The advisor should compare these to an IRA investment and present both to the client so they can make a more informed decision.
Do I Need to Roll Over My Account for You to Provide Advice?
No. You do not need to roll over your accounts to get advice. I offer flexible payment options for clients. I can have you pay an hourly fee if it costs more to roll it over.
One of the reasons the Department of Labor created the Fiduciary Rule is their concer that financial advisors are recommending clients roll their 401k or 403b when it would cost them less to keep their money in the previous employer’s plan.
My advice is ongoing as we continue meeting and adjusting your accounts in retirement getting you the income and security you need.
My Professional Designations
Individuals who hold the AIF® designation have:
- Completed the AIF® Designation Training;
- Passed the AIF® designation exam;
- Met the designation’s prerequisites and qualification and conduct standards;
- Accrued a minimum of six hours of continuing professional education, with at least four hours coming from fi360-produced sources;
- Attested to a code of ethics.
Individuals who hold the CRPS® designation have:
- Completed a course of study encompassing design, installation, maintenance and administration of retirement plans;
- Passed an end-of-course examination that tests their ability to synthesize complex concepts and to apply theoretical principles to life situations;
- Pledged adherence to the CRPS® Standards of Professional Conduct, and are subject to a disciplinary process in that regard.
CRPS® designees renew their designation every two years by completing 16 hours of continuing education, reaffirming adherence to the Standards of Professional Conduct, and complying with self-disclosure requirements.
Individuals who hold the AWMA® designation have:
- Completed a course of study encompassing wealth strategies, equity-based compensation plans, tax-reduction alternatives, and asset-protection alternatives;
- Passed an end-of-course examination that tests their ability to synthesize complex concepts and apply theoretical concepts to real-life situations;
- Agreed to adhere to the AWMA® Standards of Professional Conduct, and are subject to a disciplinary process in that regard.
AWMA® designees renew their designation every two years by completing 16 hours of continuing education, reaffirming adherence to the Standards of Professional Conduct, and complying with self-disclosure requirements.
CFS designation is awarded upon passing an examination on mutual funds, ETS, REIT’s, closed-end funds, and similar investments. Advanced studies on topics include:
- Fund analysis and selection;
- Asset allocation;
- Portfolio construction;
- Sophisticated investment strategies for risk management, taxes, and estate planning.
San Diego, CA, November 13, 2020 – The Institute of Business & Finance (IBF) recently awarded Tim Hayes with the only nationally recognized tax designation, CTS™ (Certified Tax Specialist™). This graduate-level designation is conferred upon candidates who complete an 135+ hour educational program focusing on personal income taxes and methods to reduce tax liability. The combined top state and federal bracket can easily exceed 40%.
San Diego, CA, September 1, 2020 – The Institute of Business & Finance (IBF) recently awarded Tim Hayes with the estate planning designation, CES™ (Certified Estate and Trust Specialist™).
This graduate-level designation is conferred upon candidates who complete a 135+ hour educational program focusing on trusts, wills, probate, retirement benefits, caring for children, and what should be done after the death of a loved one. Over $50 trillion is expected to pass from one generation to another during the next half-century.
The Accredited Portfolio Management AdvisorSM, or APMA® program, is a designation program for financial professionals. The program educates advisors on the finer points of portfolio creation, augmentation, and maintenance. Students will gain hands-on practice in analyzing investment policy statements, building portfolios, and making asset allocation decisions.
San Diego, CA, May 12, 2020 – The Institute of Business & Finance (IBF) recently awarded Timothy Hayes with the only nationally recognized annuity designation, CAS® (Certified Annuity Specialist®).
This graduate-level designation is conferred upon candidates who complete a 135+ hour educational program focusing on fixed-rate and variable annuities. Several trillion dollars are invested in annuities; it is estimated that at least one-third of all annuity contracts are not titled correctly.
Where Do I Work Tim Hayes
I will provide expert, highly personalized financial planning, retirement planning, and investment solutions from my Boston and Dartmouth offices. So when you need an independent financial advisor in Massachusetts, Boston or Greater Boston, Salem or the North Shore, Hingham, or any other town on the South Shore, Andover, the Merrimack Valley, and the MetroWest, including Framingham, or the Southcoast, Martha’s Vineyard, Nantucket, and Newport, RI from my Dartmouth office.
Please be sure to speak to your advisor to consider the differences between your company retirement account and a rollover investment in an IRA. These factors include but are not limited to changes to the availability of funds, withdrawals, fund expenses, fees, and IRA-required minimum distributions.
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