When you leave a job, you’ll need to decide what to do with your 401(k). One option is rolling it over into another 401(k) or an IRA. This process helps you maintain control over your retirement savings and ensures they continue to grow. Here’s a quick guide to understanding what a 401(k) rollover is, who should consider it, and how it works.
What is a 401(k) Rollover?
A 401(k) rollover is the process of transferring your retirement savings from your old employer’s 401(k) plan into your new employer’s plan or an IRA (Individual Retirement Account). By rolling over your 401(k), you can consolidate your savings and continue growing your tax-deferred money.
Who Should Consider Rolling Over a 401(k)?
- Changing Jobs: When you leave a job, rolling over your 401(k) into your new employer’s plan or an IRA keeps your retirement savings in one place.
- Retiring: If you’re retiring, rolling over your 401(k) into an IRA can offer more flexibility regarding investment options and withdrawal strategies.
- Consolidating Accounts: If you have multiple 401(k) accounts from past employers, rolling them into one account can simplify managing your savings.
Why Should You Roll Over Your 401(k)?
- Avoid High Fees: Many 401(k) plans have administrative fees that can add up. You may access lower-cost investment options by rolling your funds into an IRA or another 401(k).
- More Investment Choices: IRAs typically offer a wider variety of investments than most 401(k) plans, giving you more control over your retirement savings.
- Simplified Management: Consolidating your 401(k) accounts into one makes managing and tracking your retirement progress easier.
- Tax-Deferred Growth: A rollover allows your savings to continue growing tax-deferred, so you don’t pay taxes until you withdraw funds in retirement.
How to Roll Over a 401(k)?
- Choose Where to Roll Over Your 401(k): You can roll your 401(k) into your new employer’s plan or an IRA, depending on what makes the most sense.
- Contact Your Plan Administrator: Reach out to your old plan administrator to start the rollover process and fill out the necessary paperwork.
- Request a Direct Rollover: A direct rollover is the best option as it avoids any tax penalties or withholdings. The funds are transferred directly from your old 401(k) to the new account.
Ready to Roll Over Your 401(k)?
Rolling over your 401(k) is an important step in managing your retirement savings. By consolidating your accounts and taking control of your investments, you can ensure that your retirement savings continue to grow and work for you. If you’re considering a 401(k) rollover, contact one of our advisors today to explore your options and take the next step toward a secure retirement.
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