A 401K rollover is the process of transferring money from a retirement plan into an IRA, or individual retirement account. Usually people do this when they are going from one job to another and want to keep the money they’ve accumulated in retirement savings from their previous employer. When you roll over your 401K, you’ll be able to tax-defer your retirement savings, which gives you a number of options when it comes to investments. 401K rollovers are just one choice for a retirement plan. Each option has its pros and cons.
When you roll your assets to an IRA, you can leave your assets in your last employer’s retirement plan if this is permitted. If your new employer allows you to move your assets to a new retirement plan, this is a viable option as well. Or, you can request the cash in your retirement account in a lump sum or installments.
If you’re considering rolling over your 401K into an IRA, a number of factors should be considered. For instance, it’s best to compare the features of your current 401K and the IRA, such as the services offered for each account and your investment options. You should also take the fees for transferring your money into account, and you’ll need to know if there is a penalty for withdrawing your money early. If you maintain assets or investments in your IRA, the cost of this is generally higher than if you performed the same financial actions in a 401K. Once you transfer your retirement funds into a savings account, meeting with a bank professional to determine the best ways to manage your money over the years can help to further secure your retirement funds. Be sure to talk to your tax advisor and/or retirement plan administrator before you make any adjustments to your retirement assets.