Thursday, November 21 2019

Rolling Over a 401k

A 401K is one of the most popular employer-sponsored retirement plans out there, with employees depending on this money for their retirement. But what happens if you lose your job? What do you do with that money and where does it go? Should you lose or quit your job, you’ll be faced with a few different options. While you could elect to cash out your 401K plan, you can get quite a hefty penalty and you’ll also have to pay taxes on the amount you cash out because it is considered income. But on top of this, you’ll also lose a ton of money that you could have potentially earned from those savings. Another option is to leave your 401K retirement savings with your employee, which may seem look a good option if you don’t know what to do with it. But this also poses plenty of problems in itself, most of all, draining your finances with fees that you may not even be aware of. In the end, the best option is to do a 401K rollover and here’s why.

To eliminate the many drawbacks of leaving your 401K retirement plan with your former employer or cashing out, opening a rollover account will allow you to continue saving for retirement easily and effectively. The best way to rollover your 401K is to place your savings into an individual retirement account, also called an IRA. Funds from your 401K can be sent straight into your IRA account without losing the money to any fees or penalties, because you are not yet actually acquiring the funds. Transferring is easy in itself, requiring only a third-party administrator to handle the transfer for you. Providing any necessary information about the account, as well as your social security number, the administrator of your IRA can directly deposit your investments.

If you don’t want someone else handling the transfer, you can do it yourself. You can do an indirect rollover by getting a check of your retirement savings and depositing the money directly into a IRA account. You’ll have 60 days to do this without any penalties or fees. There is however a 20 percent withholding requirement. For the actual opening the IRA rollover account, there are no fees nor are there fees for maintaining it. Should you need to withdraw money from your IRA rollover, you can do so without penalty unlike a 401K, although there will be taxes.

Once your money is into an IRA rollover account, there are a ton of advantages you’ll have.  Most of all, your money will be able to continue to grow rather than stay the same amount as it would if you left your 401K with your employer. You’ll also have the advantage of being able to make contributions. If you have multiple retirement accounts, you can consolidate the accounts into one IRA. Your IRA provider may be able to help you with investment guidance and provide you with any necessary tools that would be of value to you. The top 401K rollover options can be found at investment companies like Charles Schwab, Fidelity and TD Ameritrade. Check them out to learn more.