Announcer:
It’s time now on KROS for Financial Focus, brought to you by NelsonCorp Wealth Management. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representative securities offered through Cambridge Investment Research Incorporated, a broker-dealer, member of FINRA, SIPC investment advisor representative Cambridge Investment Research Advisors Incorporated, a registered investment advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. Now, here’s today’s Financial Focus program.

Nate Kreinbrink:
Good morning, and welcome to this week’s Financial Focus brought to you each and every Wednesday morning right here on KROS. Well, this is Nate joined this morning with John. John, it’s been a few weeks, I guess you could say, since you’ve been on. I know you’re busy down in the Davenport office. But a bitterly cold morning again that you had to drive up to Clinton again.

John Nelson:
It sure is, and I think, like we talked about as we came in, it’s going to be hanging around for another week or so at least, unfortunately.

Nate Kreinbrink:
I always try to look as an optimist on things like this and you go another week that puts us closer to the end of February, that transition is over to March, which, again, you can have cold temperatures in March, but they usually don’t stick around a lot. Super Bowl, we just had this past weekend. Seen a lot of pictures or whatever on social media or whatever saying, “Okay, the only thing I like about the Super Bowl is now it’s baseball season.” So pitchers and catchers are going to be reporting a little bit. So sunshine and hopefully we’ll round that curve here shortly.

John Nelson:
Yeah, exactly. We’re getting close.

Nate Kreinbrink:
And I know the weather has been a little bit of a challenge. The Davenport office, the new building that we’re putting up together, it’s been a little bit of challenge. Maybe give a quick little update as far as how things are coming along down there.

John Nelson:
Yeah, sure. You’re right, the last week or so, this extreme cold has slowed us down a bit. It was a slow start to get things underway, but we’ve been making some really nice progress the last two and a half, three months. Starting next week, windows are going to be popping in there, Nate.

Nate Kreinbrink:
Good.

John Nelson:
Things are moving along nicely. We don’t see a whole lot of hurdles ahead of us, at least at this point. Construction, there’s always things that come up, of course. But yeah, things are moving along nicely, and essentially, for those that don’t know, we’re replicating what’s worked so well in our Clinton office with accounting services, estate planning attorneys, everything in house to better serve our clients. We’re replicating what we’ve done here in Davenport. Our office will be on North Utica Ridge Road right on the Davenport Bettendorf line. So we’re excited to get this finished up and I can stop pretending to play a contractor, Nate, and get back to serious work.

Nate Kreinbrink:
Although your son, Will, I think, has really enjoyed the machinery. I’ve seen a lot of those pics or everything that he’s enjoyed those big boy toys, I think.

John Nelson:
Yeah, he sure has. Any chance he can get to go over there, we go over and check on things.

Nate Kreinbrink:
So, again, we were talking to on the way up here, and again, a bunch of different topics, tax season, we’ll be having either Andy Ferguson or Mike van Zudin on with me next week to talk a little taxes from NelsonCorp Tax Solutions. But we decided today to go into some of those decisions that individuals have when they have those life-changing events, and most notably when they switch jobs, they retire. And the question always comes up, “Well, I have my 401K. What do I do with it?” And usually, I mean, you can leave it in the plan where it is, move it over to a current plan if you switch jobs, or look to roll it over to an IRA. Each one of those has some different pros and cons in looking at what do you really want to accomplish, and how comfortable do you feel with leaving your money at an employer that you may not be with?

Nate Kreinbrink:
And a lot of times people settle on moving it over to, again, their current plan or moving it over to an IRA and having someone manage it, because, again, the famous question we always ask people is, “Well, how have you been managing up until this point?” And they get that shoulder shrug and they say, “I haven’t,” and that’s I think the scary part. And then having someone look over it, it’s usually an option that most people go with.

John Nelson:
Yeah. And I would say too, not particularly common but I’ve seen a few recently, where I would say a lot of it is dependent upon the size of the plan, but even some employees that are no longer working at a previous employer where the old employer is actually pushing them out of the plan, they view it as, “Hey, this was a benefit while you were working here, but now that you no longer work here, how about you move your money out of our plan so we don’t have to pay any administrative or custodial fees?” Surprising, especially for some people that have worked in those positions for 20,30 years, that they’re actually doing that. But we have seen that with a number of plans over the last 12, 18 months.

John Nelson:
I wouldn’t say it’s particularly common, but I think it’s going to become more common. So if you are definitely getting that nudge, then it’s a question of, do I bring it to maybe a new job or a new employer plan? Or do I take it to a self-directed IRA where I have total control over what it’s invested in, what I’m doing with it? Just weighing out those options is really important, and we see this a lot.

Nate Kreinbrink:
Right. And I think that goes along with that as far as when people get that notification from a previous employer saying, “Hey, you’ve got to do something with this.” A lot of times there’s a packet of papers that accompany that letter that people get notified with and it’s extremely important that people look at those forms and make sure they fill them out correctly. Because if they don’t, a lot of times there’s one that brought them in and said, “I think I got this done right, can you just look over it quick before I send it in?” Good thing they did, because they they hit withdrawal as basically as a 100% distribution to them. So it was all pre-tax money, it all would have been taxable to them then in the year that they would have took it, and because they were below 59 and a half, they would’ve gotten the 10% penalty then on top of that.

Nate Kreinbrink:
So, again, good thing, we caught it. But, again, you get that packet of information, a lot of times there’s 10, 15 pages, and really only two or three actually apply to what you’re actually doing. So it’s understanding them, making sure we check the right boxes, we fill in the right section, we get the check made out to who it correctly should be made out to. And again, it’s a mistake that you don’t want to make, and having to settle up with the IRS when you go in and file taxes because of a wrong box that you checked is not fun, and it’s going to be really expensive for you.

John Nelson:
Yeah, that would fall under the category of a fatal error. I mean, if you inadvertently are taking 100% lump sum taxable and penalty, I mean, that can be catastrophic for you and or your family. So yeah, really important stuff. I would say weighing out what you do with that money, let’s say it’s coming out of the plan, now, I’m going to a new position, taking it to that next job’s plan versus an IRA, an IRA, there’s a lot more flexibility. IRA stands for individual retirement account. You have the flexibility to literally invest in about anything under the sun versus a lot of the 401K plans, they’ve got more of a restricted investment option availability. 15, 20, some of the employers are even down in the single digits in terms of investment options available.

John Nelson:
Not that those are a bad option, but they can be pretty restrictive compared to what can be found elsewhere. So just weighing out that new plan, really looking through to size that up, both in the investment options and the overall pricing of that plan versus what you could do elsewhere. We do a lot of that analysis and we think it’s really important before just jumping in or making a quick decision.

Nate Kreinbrink:
Right. And another thing that’s came up, at least with me with some of the individuals I’ve met with, is it’s just an in-service rollover. And most people think that you have your 401K, you really can’t touch it or do anything with it until you have that separating event, whether you retire, you switch jobs, whatever the case it may be. But a lot of plans we’re seeing now actually allow you to do a 59 and a half in-service rollover. Essentially, once you hit that age, you are able to transfer up to a certain amount of your 401K over to an IRA while you are continuing to still work. And why would someone do that? Well, in the instances that we’re looking at, they’re getting closer to retirement and their account balance has managed this way over the past 12 months. They don’t want to see it hit that big downturn again in the market where they’re going to have to enter retirement with, one, either a lot less money than what they thought they were, or, two, they’re going to have to continue to work to build that thing back up.

Nate Kreinbrink:
So they want to get that money over to an account where someone can help manage it for them as they get closer to that retirement date and that peace of mind to say, “I’ve got it this far, I’m too close to risk it anymore and just to put money in and not really know how it’s invested. It’s time to have someone look over this for me.” So what we do is we make that call and we roll it over to an IRA and then get people taken care of that way. So most plans, again, like I said, are allowing that now. More and more are. So if you’re 59 and a half or older, that is an option that we can look at where you can take a chunk of your 401K, roll it over to an IRA. That’s not a taxable event, because it’s going directly from your 401K to an IRA, and you just get that process started to have someone manage it for you. It’s something I think everyone should really take a look at and understand if it fits them.

John Nelson:
Yeah. And I’d say the last point I’ll make, as we run out of time here, Nate, is just sizing up what your current plan looks like in terms of overall cost structure and investment options. A lot of people we ask, “What is the current 401K plan costs associated with investing your money?” And oftentimes people say, “It doesn’t cost anything.” Well, that’s simply not true. The costs are within the investments that you’re invested in and doing a detailed analysis, either yourself or with a financial professional that you’re sitting down with, can make a lot of sense, because especially for those older plans that they may not have been updated say in the last three, four, or five years, the pricing we see can be awfully expensive. So just making sure that you know what you own and why you own it as well as the overall structure of your current 401K plan versus other options available to you.

Nate Kreinbrink:
Again, all good stuff. And, again, as people’s 401K plans became their main source of saving for retirement, it’s important that you understand it, making sure you’re maximizing it along the way. I did want to mention real quick before we run out of time that every Friday, NelsonCorp Wealth Management is wearing jeans for charity. Money raised in the month of February will be donated to the Clinton Rotary Club Scholarship Fund. John, as always, I appreciate you joining me this morning.

John Nelson:
Absolutely, happy new year.

Nate Kreinbrink:
Nate and John with NelsonCorp Wealth Management bringing you this week’s Financial Focus. Thanks again for tuning in and have a great rest of your week.

Announcer:
Financial Focus is a production of NelsonCorp Wealth Management in Clinton and Davenport. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representative securities offered through Cambridge Investment Research Incorporated, a broker-dealer, member of FINRA, SIPC. Investment advisor representative Cambridge Investment Research Advisors Incorporated, a registered investment advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. For more information, visit our website at www.NelsonCorp.com.