IRA Rollover Tips | NWP | Naples Florida

Rolling over Your 401(k) to an IRA

Financial freedom and peace of mind requires not only paying your bills and being debt-free, but also putting away enough for retirement and discretionary expenses. Saving, budgeting and investing must be essential components of your financial plan. At most companies, a 401(k) plan is an essential part of this savings plan. In this article, we will explain why rolling over a 401(k) can be advantageous when planning for retirement.

The Standard Retirement Investment Tool: 401(k) Plan

For a long time, the 401(k) plan has been a standard retirement investment tool for American citizens with over 750,000 plans available. Today there are both corporate 401(k) plans and Solo or Individual 401(k) plans for proprietorships or small business owners. Military personnel have access to a special TSP account that acts like the 401(k) plan in the private sector.

In simple terms, a 401(k) plan, a type of ‘defined contribution plan,’ is a retirement savings plan that is sponsored usually by an employer and lets you save a part of your paycheck before taxes are taken out. Taxes are not paid until the money is withdrawn from your account, typically only at retirement.

By withdrawing money from your paycheck prior to taxes, you also lower your taxable income and thus lower your taxes as a whole.


Pre-tax income, ability to stockpile a large amount of earnings at one time with an annual contribution limit of $18,000 and catch-up contributions for people over the age of 50 of up to $6,000 additional.


401(k) plans are limited to traditional mutual funds and do not include any stocks. You thus cannot benefit from any significant stock growth.

Our Recommendations

At Naples Wealth Planning, we assist our clients in maximizing their retirement income and developing financial retirement plans that help you lead the life you envisioned with sufficient income.

We work with clients to rollover their 401(k) plans into traditional IRAs. No tax is incurred but the client benefits immediately from stock growth. Clients can then roll over this income into a Roth IRA if desired, and we recommend spreading this out the associated tax fee to convert from a traditional to Roth IRA over 5 years.

Within an IRA, capital gains, dividends, and option premium are collected tax free. We believe this to be one of the strongest arguments for rolling over your 401(k). At NWP, we specialize in managing a dividend strategy that is enhanced by selling covered calls. 

Example Scenario

Say for example, you are aged 50 and have saved over $500,000 in your 401(k) plan sponsored by your employer. Every year you are able to put away more pre-tax money ($18,000) than you could do if you put it aside in a Roth or traditional IRA immediately ($5,500 limit annual). Over the years, you have built a solid nest egg. However, your savings are all in mutual funds and earning a low rate of return.

After you have maximized the benefit of stockpiling your 401(k) plan, you can then roll it over to a traditional IRA and then maximize your return in the stock market! This offers a great investment opportunity with pre-tax income.

At Naples Wealth Planning, we can assist you in rolling over your IRA and achieving your retirement goals. Call us at (239) 260-9386 to learn more and start saving!

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