Hey bestie! It's Your Wealth Bestfriend®️.
I’m starting my month off with a bang. I spent all morning on the phone (and a few days last week) trying to correct a confusing and potentially costly financial mistake and you know who had to do all the leg work and use all her skills? ME.
The financial institutions acted real brand new. That's why it is crucial for you to LEARN about money so that you have the confidence to deal with issues as they arise. So let me break down this situation for you.
During My Instagram live show, Money Monday, I reminded my besties not to let retirement accounts just sit around. So I took my own advice and I started requesting transfers.
Being someone who has worked in the financial industry and is a financial advisor this means I know the most important thing to note when you are rolling over old investment or retirement accounts is to MATCH the accounts.
If you are rolling over a 401K, 403B or IRA you need to understand that money in that account has not been taxed yet so it needs to be transferred to another tax-deferred/pre-tax account like your new employer 401(K) or IRA.
If the money has been taxed and was in a Roth IRA it needs to go to another ROTH IRA. (See a pattern here?)
If you had the funds in a regular (non-retirement) account and you want to keep it THE SAME then you need to roll the account over to a regular investment/brokerage account.
So your wealth bestfriend did her research and requested transfers of 3 accounts. All three went through but one account I requested a transfer for didn’t give me any details on what type of account it was currently in, but when I received the statement it said FBO Your Wealth Bestfriend IRA. Meaning for the benefit of me, Individual Retirement Account.
I called the company holding the funds to confirm the account and they said they didn’t know if it was an IRA or ROTH IRA (remember there is a big difference between these accounts).
I called the company I was sending the money to, they just said if it doesn’t go to the correct account it will get rejected. So what do you think happened bestie?
I requested a transfer based on the information I had, a statement, and it went through, to my IRA. Then I get a tax document, a 1099-R. Please look at these when you get them bestie. While, looking at mine, I see that part of the money that I rolled over says it is a non-taxable Roth contribution! (ARE YOU SERIOUS!!)
The 1099 tells me the money is in the wrong place, it went to an IRA remember? So I call my bank and they act like the money is probably in the right place and they basically try to talk me out of making any changes, saying, “if we move it to the Roth IRA there might be taxes” and so I realize I have to get proof outside of this 1099 I already have to prove that something wasn’t transferred correctly.
So I call the other company back (again) and get transferred to a few other departments until someone finally says, "Yes, ma'am you are right. Your bank should know where the money goes because we sent them a distribution statement."
The statement was also sent it to me but via secure email and because of all the accounts I have, you know I didn’t pay it any mind because I requested this transfer MONTHS AGO and thought it was handled.
I was able to login to the account and THERE IT WAS!! A document saying clear as day that almost $10K of what I was transferring was non-taxable and therefore should be in my Roth!
I have the document I need to save myself DOUBLE TAXATION. Because bestie, I need you to understand, if I had left the money and trusted the bankers I was speaking to, I would have subjected my self to double taxation federally and at the state level.
I have already paid taxes on that money, THEN when I hit retirement age and start withdrawing money, I WOULD BE TAXED AGAIN! And decades from now when i am able to withdraw my money without a penalty who is going to remember the year 2023 when this error occurred and fix this?? No one!
So I call my bank again and stay on hold for hours while they research and fail to see the document they got almost a year ago telling them which accounts this money should go to. I'm still working to get this corrected and at this point it looks like the transfer will have to be cancelled and everything will have to be sent back so that it can be recoded and transferred correctly.
All this to say BESTIE, no one is going to advocate for you the way you will advocate for you. It took my knowledge of taxes, tax forms, investments, retirement accounts, investigative skills and patience to get this task handled and save 22-37% of my money in the future.
I know things like this aren't taught in school and this is not common knowledge (it should be, but it is not) but knowing things like this will serve you better in the future. My situation was a bit more complex than yours might be but I want you prepared. So of course whenever I can I will continue to talk about all things money, investing, and estate planning. If you need help or an accountability buddy reach out to Your Wealth Bestfriend®️ today.
Jala Eaton known as Your Wealth Bestfriend® is a seasoned personal finance writer as well as an Attorney and award-winning Certified Trust & Fiduciary Advisor (CTFA). When she is not running her businesses, teaching, or writing she enjoys dance parties in the kitchen with her child. Her work has appeared on, Business Insider, Experian, Real Simple, The Skimm, Yahoo News, and others.