The Benefits of a 401(k) Rollover

There are a number of benefits that come along with taking advantage of the 401(k) offered to you by the company you work for. After you leave the job, however, you might not be sure what to do with the funds from the 401(k) until they can be accessed. Luckily, there a handful of options available to you. One popular choice is a 401K rollover. This is a process where you take the funds and convert the 401(k) into an IRA. Look over these benefits to see if it is a good choice for you.

Getting Started

First, you might want to know why this is a beneficial move. While keeping your money in its existing 401(k) does keep it better protected from creditors, there are several key advantages that come from putting the funds into an IRA. For one, you’ll have a more diverse selection of investments available to you. Beyond this, an IRA also offers reduced fees and cheaper investments than is typically available with a 401(k). It is important for you to weigh out the pros and cons before you commit to the decision.

Roth or Traditional

If you think a 401K rollover is a good fit for your financial future, there are some decisions to be made. You need to select either a Roth IRA or a traditional IRA. There are several main differences between the two options, mainly centering around when you pay taxes on the funds that carry over. After picking the type of account, you will create a rollover IRA through the financial institution of your choice. Then, you will work with the institution to ensure the payments into your 401(k) carry over into your IRA

Fees and Considerations

There are a handful of considerations to take before you make this switch. For one, there can be a number of fees associated with rolling money into an IRA. While the fees are smaller than what you can expect with a 401(k), you will still be responsible for management fees, transaction fees, and administrative fees. Learn about all of these costs so you can properly prepare for what you will owe and not be surprised when these fees are taken from your account. Find an online fee calculator to get an exact idea of what you’ll pay.

There are a number of advantages that come along with a 401K rollover. Take time to weigh out your options and discover whether or not you can benefit from switching your money into an IRA.

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