Mastering Your 401(k) to IRA Rollover: Essential Insights for Newell Brands Employees

Healthcare Provider Update: Healthcare Provider for Newell Brands: Newell Brands employees often utilize a healthcare plan through large national insurers such as UnitedHealthcare, Anthem, and Cigna. Specific offerings can vary based on the employee's location and the plan they choose, and Newell typically provides a comprehensive suite of benefits focused on preventive care, wellness, and prescription medications. Potential Healthcare Cost Increases in 2026: As we approach 2026, Newell Brands employees should brace for significant healthcare cost increases. Premiums in the ACA marketplace are anticipated to rise sharply, with some states seeing hikes over 60%. This surge is primarily driven by expiring federal subsidies and increasing medical costs, leading to a potential 75% increase in out-of-pocket expenses for individuals reliant on these plans. Employees should proactively review their benefit options and strategize to manage these heightened healthcare expenses, considering changes in deductibles and out-of-pocket maximums that employers may implement in response to rising costs. Click here to learn more

In the complex realm of retirement planning, a critical yet often overlooked issue is the unintentional delay of cash funds during the 401(k) to IRA conversion process. This seemingly minor oversight has profound consequences, costing American pensioners billions in unrealized investments. The phenomenon, where large sums remain un-invested, underscores a critical area of concern as the retirement savings landscape, including for those at Newell Brands, continues to evolve.

According to a study by  Vanguard Group , there's a notable trend: a significant portion of retirees transferring their 401(k) savings into Individual Retirement Accounts (IRA) fail to reinvest these funds into the market. Specifically, nearly half of Vanguard clients who moved their 401(k) accounts to IRAs in 2015 still held their funds in cash seven years later. This inertia is not just a minor incident but a significant financial loss, with Vanguard estimating an annual loss exceeding $172 billion in un-invested retirement funds. Newell Brands employees should be mindful of these trends and take pre-emptive measures to avoid this issue.

The default of payment after transfer is particularly pronounced among younger employees, who are accustomed to automated investment strategies in employer-sponsored employment plans. This group is particularly vulnerable to missing out on the cumulative benefits of early investment. However, the issue spans across ages, affecting older investors who, according to financial advisors, require some exposure to stocks to ensure the sustainability of their retirement funds.

This oversight is increasingly critical given the predominant role of IRAs in the American retirement system. With IRAs holding about $14.3 trillion in assets, surpassing the amount of $11.1 trillion in 401(k)-type plans according to data from the Investment Company Institute, the size of un-invested funds represents a major opportunity to generate wealth.

The rollover process typically involves liquidating 401(k) assets by the management company, which then transfers the funds to an IRA. While this procedure facilitates the transfer, it inadvertently assumes that the funds remain un-invested unless the account holder actively chooses new investments—a step many seem to overlook. According to a 2022 Vanguard study, more than half of IRA contributors left their funds in cash for at least one year.

The array of investment options available in IRAs, although beneficial for customizing investment strategies, can also overwhelm Newell Brands account holders, potentially leading to indecision. Furthermore, a prevalent notion that custodians such as Vanguard or Fidelity Investments automatically invest IRA contributions further exacerbates the issue. Frequently, large sums in IRAs remain consistently in cash, as confirmed by a Vanguard survey where 68% of IRA clients admitted they were unaware of their investment status.

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The financial consequences are significant. With the Federal Reserve's interest rate hikes in 2022, cash investment yields have seen an increase, with money market funds offering about a 5% annual interest rate. However, compared to the historical earnings of major American corporations, which have recorded an average annual rate of 7.19% since 1926 according to  Morningstar Direct , the potential gains from proper investment management are considerable.

An essential element Newell Brands employees should consider during the 401(k) to IRA conversion process is the impact of tax consequences. According to the  IRS , if a rollover is not performed correctly, retirees could be taxed immediately on their 401(k) funds as ordinary income, which can reach up to 37%, depending on the tax bracket. Moreover, an incorrect rollover can result in a 10% early withdrawal penalty if under the age of 59½. These potential financial consequences highlight the importance of managing the rollover process carefully to preserve retirement savings. It is crucial to adhere to IRS rollover rules to avoid these costly penalties and taxes.

Consider transferring your 401(k) to an IRA without immediately investing the funds as akin to planting a garden but forgetting to water the seeds. Just as seeds require regular irrigation to flourish and thrive, your retirement savings need early investment to expand through the power of market earnings. Leaving your rollover funds in cash is like leaving the garden unattended—likely compromising potential growth and profits. It is crucial to ensure that your retirement funds are actively invested, just like a diligent gardener tending to their plants to enjoy a rich harvest.