When leaving Boeing, you have the option to roll your 401(k) balance into a new retirement account. This can give you more control over your savings, but it also comes with important tax considerations. Here’s how it works and what to watch out for.
Key Takeaways
Former Boeing employees can roll their 401(k) into a traditional IRA, a Roth IRA, or another employer’s retirement plan.
A direct rollover moves your savings directly between retirement accounts, while an indirect rollover sends the money to you first and comes with additional tax requirements.
While rolling over your Boeing 401(k) could provide benefits, it is not mandatory. You can leave your 401(k) balance in place if you prefer.
What Is a Boeing 401(k) Rollover?
A 401(k) rollover means moving money from your Boeing 401(k) into another retirement account without cashing out your savings. This can help you consolidate retirement accounts, access different investment options, or manage your savings outside the Boeing plan. The most common destinations are a traditional IRA, Roth IRA, or another employer’s retirement plan.
When Should You Roll Over Your Boeing 401(k)?
When you leave Boeing, you can keep your 401(k) balance where it is. Boeing does not require former employees to move their retirement savings out of the company plan. Leaving your balance in place will give you the same investment options, and your wealth can continue to grow over time. But there can be good reasons to roll your savings into an IRA, such as…
You Want More Investment Options
The Boeing 401(k) gives you a fixed menu of investments to choose from. An IRA is not limited to that menu, so you can choose from a much broader range of mutual funds, ETFs, stocks, bonds, and other investments. That can be valuable if you want to:
Expand and diversify your portfolio
Reduce exposure to certain types of investments
Use types of funds that are not available inside the Boeing plan
This flexibility often makes it easier to build a portfolio around your retirement goals.
You Want to Consolidate Your Accounts
If you have retirement savings spread across multiple accounts, moving them all into an IRA is a great way to simplify your finances. That can make it a lot easier to manage your investments. Instead of tracking separate allocations, beneficiaries, statements, and withdrawals across multiple accounts, you can bundle them all together.
You Want to Make Roth Conversions
A rollover can also be useful if you want to move some or all of your pre-tax retirement savings into a Roth IRA. This is known as a Roth conversion, and it’s one of the most common tax strategies for new retirees. When converting pre-tax savings to Roth, the converted amount will be taxable. Early retirement can be the perfect time for this, since your income may be lower than it was during your career, allowing for Roth conversions without pushing you into a higher bracket.
To do this, you can roll money directly from a traditional 401(k) into a Roth IRA. However, it’s often better to roll your Boeing 401(k) into a traditional IRA first, then make smaller Roth conversions over several years. This lets you control how much you convert each year based on your income and tax situation rather than creating a large tax bill all at once.
You Want IRA-Specific Tax Strategies
Some retirement tax strategies are available through IRAs but not through a 401(k). One common example is a qualified charitable distribution (QCD). Once you reach age 70½, you can make charitable donations directly from an IRA to a qualified charity without the donation being taxed. This can reduce your overall tax burden while ensuring more of your donations go to the charities you choose.
QCDs also count toward required minimum distributions (RMDs). By making a QCD, you can reduce the taxable amount you would otherwise have to withdraw as an RMD. In both cases, this strategy can help optimize your tax burden while supporting the causes you believe in.
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When Does an IRA Rollover Not Make Sense?
Rolling your Boeing 401(k) into an IRA comes with plenty of benefits, but there are situations where it may not make sense. Before starting a rollover, consider whether you could benefit from any of these features.
You’re Retiring Early
Under normal rules, any withdrawals from your 401(k) before age 59½ are subject to a 10% additional tax. But if you leave Boeing during or after the year you turn 55, the rule of 55 lets you take early withdrawals without the usual penalty. This can make early retirement more practical for many Boeing employees.
However, this exception only applies to savings held in the company 401(k). If you roll your balance into an IRA, you will have to wait until age 59½ to avoid the early-withdrawal penalty. Because of this, if you are planning to retire early and expect to need access to your savings before then, it may be worth leaving the money at Boeing to preserve the rule of 55.
You Prefer the Boeing 401(k) Investments
An IRA gives you more investments to choose from, but more options are not always necessary. If you’re already content with the mix of funds Boeing offers through the 401(k), there may be little benefit to moving your savings just to expand the menu. In that case, leaving your savings in place to grow at Boeing may be the easiest option.
The Boeing 401(k) Has Lower Fees
The Boeing 401(k) has remarkably low fees for the value it provides. Like other large employers, Boeing can negotiate lower investment expenses than individual investors would pay on their own. Before rolling over your account, compare the total cost of the Boeing plan with the IRA you are considering. Even a small difference in annual fees can add up over a long retirement, especially if you have a large balance. It may still be worth the added cost, but higher fees should always be factored into the trade-offs.
You Own Appreciated Boeing Stock
If your Boeing 401(k) holds highly appreciated Boeing stock, you should consider the net unrealized appreciation (NUA) rules before rolling those shares into an IRA. NUA can allow the increase in value of qualifying Boeing stock to eventually be taxed at long-term capital gains rates instead of ordinary income tax rates. If you roll your Boeing stock from the company 401(k) into an IRA, you will lose that opportunity. In some cases, it may make more sense to distribute the shares to a taxable brokerage account and roll the rest of the 401(k) into an IRA.
If you aren’t sure whether an IRA rollover is the right move, a fiduciary financial advisor can help you decide which options are best for you.
Choosing the Right Account for Your Rollover
If you decide to roll over your Boeing 401(k), the next step is choosing where the money should go. For most retirees, the main options are a traditional IRA or a Roth IRA.
Traditional (Pre-tax) IRA
A traditional IRA is usually the simplest option if you have a traditional 401(k) account and want to keep your retirement savings tax-deferred. Any Boeing 401(k) money that has not already been taxed can be rolled into a traditional IRA without creating an immediate tax bill. Just like in a traditional 401(k), the taxes will be deferred, and you will pay ordinary income tax when you withdraw the money later.
This can be a good fit if you want to postpone taxes, keep more of your savings invested, or make Roth conversions gradually during retirement instead of paying tax on a large amount all at once.
Roth IRA
If your Boeing 401(k) already includes Roth savings, you can roll those funds into a Roth IRA without being taxed again. If you roll pre-tax 401(k) funds into a Roth IRA, those funds will be added to your taxable income for the current year. In return, you will get tax-free growth and qualified withdrawals from your Roth IRA later.
As mentioned above, that can be especially useful in the early years of retirement, when your income may be lower than it was while you were working. Instead of converting your entire balance at once, you can also move only part of your savings to Roth and leave the rest tax-deferred.
New Employer’s 401(k)
If you are moving to a new job with a 401(k), you can likely roll your Boeing balance into your new employer’s plan. This is often an easy option when available.
Boeing 401(k) Rollover Options: Direct vs. Indirect
One of the most important aspects of a 401(k) rollover is whether you opt for a direct or indirect rollover.
A direct rollover means your 401(k) funds are transferred directly from your current plan to your new account, either by digital transfer or through a check made out to the receiving account.
An indirect rollover means the funds are withdrawn and you will receive a check made out to you, which you can then deposit in your new account.
Unlike some decisions, there is a clear winner here. A direct rollover is virtually always the better choice.
If you opt for an indirect rollover, Boeing is required to temporarily withhold 20% of any taxable portion of your balance for federal taxes. You would then have 60 days to deposit the full distribution into another eligible retirement account. That includes the missing 20%, which you must cover out of your own pocket. Missing that 60-day deadline or failing to deposit the full amount may result in even more taxes and penalties.
A direct rollover avoids all these problems. You simply direct your savings to the new account and wait for the money to show up.
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Steps to Roll Over Your Boeing 401(k)
Once you decide a rollover makes sense, the process itself is fairly straightforward.
1. Decide Where You Want Your Money to Go
Start by reviewing your Boeing 401(k) balance to see how much you have in pre-tax, Roth, and after-tax savings. This will help you determine which accounts you need and how much money to send to each one.
Your existing pre-tax and Roth savings can go into an equivalent IRA account without creating a tax bill.
You can also convert some or all of your pre-tax savings to Roth. Consider your current tax bracket, your estimated income in retirement, and how much you can afford to convert right now. It may be better to leave your savings as they are and make Roth conversions a little at a time in the years ahead.
If you have after-tax funds that have not been converted to Roth yet, you can roll the after-tax contributions into a Roth IRA with no tax bill. You can send any investment earnings to a traditional IRA to keep them tax-deferred or convert them to Roth now, though the earnings will be taxed if you do.
If you aren't sure what strategy is best for you, a financial advisor can help you compare your options and develop a rollover strategy that fits your unique situation.
2. Open the Receiving Account(s)
Next, you will open the account or accounts that will receive the money. Compare investment options, fees, and available services to find one that meets your needs. If you already have an IRA, you may be able to use that account instead of opening a new one, which can simplify the process.
Once you have an account ready, ask the receiving institution for its rollover instructions. You'll need the account numbers, the exact name to use if Fidelity issues a rollover check, and the address where Fidelity should send the funds. Keep this information handy.
3. Start the Rollover
You can access your 401(k) at NetBenefits.com/Boeing. From there, you can start the rollover using Fidelity’s instructions for moving the money to your new account. Remember to choose a direct rollover so the money moves from the Boeing plan to the new retirement account without being withdrawn. If you are moving pre-tax, Roth, and/or after-tax savings, confirm that each portion is being sent to the correct destination before approving the rollover.
4. Confirm the Rollover
Once the transfer is finished, check both your Boeing account and the receiving account. Make sure the correct amount left the Boeing plan and arrived in the correct account. Rollover funds can arrive as cash, so make sure the new account is invested according to your retirement plan.
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Is a Boeing 401(k) Rollover Right for You?
Rolling over your Boeing 401(k) can open up new investment options and simplify your finances, but keeping your savings in the Boeing plan can also have its advantages. Before making a decision, consider how a rollover will affect your retirement income, taxes, and long-term financial goals. You don't have to move your entire balance at once, either. In some cases, keeping some savings at Boeing while rolling the rest into an IRA may give you the benefits of both options.
At TrueWealth Financial Partners, we help Boeing retirees navigate those decisions and make the most of their retirement savings. We can help you weigh the trade-offs, identify potential tax savings, and develop a rollover strategy that suits your retirement goals.
Boeing 401(k) Rollover FAQs
1. Can I roll over only part of my Boeing 401(k)?
Yes, Boeing allows partial rollovers of eligible funds. You can move a portion of your savings into an IRA while leaving the rest in the Boeing plan. This can be useful if you want more investment flexibility while preserving access to benefits like the rule of 55 or Boeing's low investment fees.
2. How long does a Boeing 401(k) rollover take?
A rollover from your Boeing 401(k) to a Fidelity IRA can be completed within a few days through NetBenefits. Moving your savings to an IRA at another institution may take longer, especially if Fidelity issues a physical check.
3. Will I have to pay a fee to roll over my Boeing 401(k)?
Fidelity's standard self-directed rollover IRA has no account-opening or maintenance fees. However, investment expenses, advisory fees, and certain transaction charges may apply depending on the account and investments you choose. Check with Fidelity and your IRA provider to understand any costs before initiating the rollover.
4. Can I roll over my Boeing 401(k) while I'm still employed?
Yes, provided you have reached age 59½. Starting at that age, you can withdraw all or part of your 401(k) balance even if you're still working. Eligible distributions can be rolled into an IRA without triggering income taxes, provided you don't convert pre-tax savings to Roth. Boeing also allows earlier withdrawals of certain funds, including after-tax contributions and rollover contributions, subject to plan restrictions.
5. Do I need to report my Boeing 401(k) rollover on my tax return?
Yes. Fidelity will issue Form 1099-R to report the distribution from your Boeing 401(k), even if you complete a direct rollover without owing taxes. Your IRA provider will also report the rollover contribution on Form 5498.
For a direct rollover of pre-tax savings into a traditional IRA, report the distribution on your federal income tax return and enter zero as the taxable amount if the entire distribution was eligible and rolled over. If you roll pre-tax savings into a Roth IRA, you must report the taxable amount instead.
Still Have Questions? We Can Answer Them!
Rolling over your Boeing 401(k) can be challenging. If you still have questions, we can give you the answers.
At TrueWealth Financial Partners, we offer personalized financial planning services tailored to Boeing employees. Our experienced advisors will help you:
Choose the right rollover option
Optimize your investment strategy
Minimize your taxes
From start to finish, we provide comprehensive guidance to ensure your retirement savings are managed effectively to align with your financial goals.
Ready to take control of your retirement planning? Contact TrueWealth Financial Partners today for a free consultation!