July 2, 2020
There are a number of benefits that come along with takingadvantage of the 401(k) offered to you by the company you work for. After youleave the job, however, you might not be sure what to do with the funds fromthe 401(k) until they can be accessed. Luckily, there a handful of optionsavailable to you. One popular choice is a 401K rollover. This is a processwhere you take the funds and convert the 401(k) into an IRA. Look over thesebenefits to see if it is a good choice for you.
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 protectedfrom creditors, there are several key advantages that come from putting thefunds into an IRA. For one, you’ll have a more diverse selection of investmentsavailable to you. Beyond this, an IRA also offers reduced fees and cheaperinvestments than is typically available with a 401(k). It is important for youto weigh out the pros and cons before you commit to the decision.
If you think a 401K rollover is a good fit for yourfinancial future, there are some decisions to be made. You need to selecteither a Roth IRA or a traditional IRA. There are several main differencesbetween the two options, mainly centering around when you pay taxes on thefunds that carry over. After picking the type of account, you will create arollover IRA through the financial institution of your choice. Then, you willwork with the institution to ensure the payments into your 401(k) carry overinto your IRA
There are a handful of considerations to take before youmake this switch. For one, there can be a number of fees associated withrolling money into an IRA. While the fees are smaller than what you can expectwith a 401(k), you will still be responsible for management fees, transactionfees, and administrative fees. Learn about all of these costs so you canproperly prepare for what you will owe and not be surprised when these fees aretaken from your account. Find an online fee calculator to get an exact idea ofwhat you’ll pay.
There are a number of advantages that come along with a 401Krollover. Take time to weigh out your options and discover whether or not youcan benefit from switching your money into an IRA.
