Use 401k Rollover To Retire In Style
When you have a 401k plan at work, and you leave your job for any reason, you can choose between taking a 401k rollover into another brokerage account, or leaving your funds with your employer's plan. For a variety of reasons, it's nearly always best to roll over your 401k.
When you have a 401k plan at work, and you leave your job for any reason, you can choose between taking a 401k rollover into another brokerage account, or leaving your funds with your employer's plan. For a variety of reasons, it's nearly always best to roll over your 401k.
With so many people saving more today, and also an increased possibility of being laid off and changing jobs, using the 401k rollover option is a way to maintain some control over your retirement security. Unfortunately, the roll over is not very well explained or understood by most investors.
The 401k roll over account is just a new account into which you move the 401k funds you accumulated with your previous employer. Then you can take over management of the funds instead of your previous employer's management company. All you need to do is open a new account with a broker you choose. They give you all the proper paperwork to transfer everything from your previous job. If you don't take any withdrawals from your account, there are no penalties or taxes.
You have four main options when you leave your employer, as to what to do with your 401k account. They are:
1) Cash your savings. Beware: if you cash out your account prior to your statutory allowance, you will pay taxes and penalties! 2) Stay with the retirement plan from your previous employer. this is hands off, but risky because you can't directly manage your account. 3) Transfer the balance of your prior retirement account into the retirement plan offered by your new employer. 4) Open a 401k Rollover IRA account with another broker or mutual fund of your choice, and transfer all retirement funds into that account.
Choice #1 is the worst of the four unless you are in serious financial trouble, because you'll pay nearly 40% of your account in fees and penalties. Choices #2 and #3 are good options for people who prefer not to manage their own money. Choice #4 however is your best chance to achieve good returns and grow your retirement account.
When you keep your funds within an employer's plan, your investment options are very limited, to a few types of large funds, plus a couple international funds maybe, and one or two money market options. You don't have a chance to take advantage of market conditions to move your retirement savings into vehicles with the potential for higher returns.
Within a self directed IRA however, you are able to actively manage your account. You have complete access to the thousands of mutual funds on the market, as well as ETFs, stocks, bonds and any of the investment vehicles available within a regular brokerage account.
Your opportunity to profit within a self direct IRA is much greater. For example, if your employer's plan is returning an average of 8%, yet you are able to achieve higher returns with investments of your choosing, say as much as 12%, with a $50,000 account, that means you could retire with an account more than double the balance if you'd have left your account with your employer's plan.
The possibilities of growing your account by switching your retirement account into a 401k rollover, can make a huge difference for you financial future.
When you switch jobs or retire, a Rollover IRA gives you a choice of investments going forward that are not available in an employer-sponsored plan. A self-directed IRA allows you to structure your retirement portfolio to increase the growth of your retirement savings.
When you have a 401k plan at work, and you leave your job for any reason, you can choose between taking a 401k rollover into another brokerage account, or leaving your funds with your employer's plan. For a variety of reasons, it's nearly always best to roll over your 401k.
With so many people saving more today, and also an increased possibility of being laid off and changing jobs, using the 401k rollover option is a way to maintain some control over your retirement security. Unfortunately, the roll over is not very well explained or understood by most investors.
The 401k roll over account is just a new account into which you move the 401k funds you accumulated with your previous employer. Then you can take over management of the funds instead of your previous employer's management company. All you need to do is open a new account with a broker you choose. They give you all the proper paperwork to transfer everything from your previous job. If you don't take any withdrawals from your account, there are no penalties or taxes.
You have four main options when you leave your employer, as to what to do with your 401k account. They are:
1) Cash your savings. Beware: if you cash out your account prior to your statutory allowance, you will pay taxes and penalties! 2) Stay with the retirement plan from your previous employer. this is hands off, but risky because you can't directly manage your account. 3) Transfer the balance of your prior retirement account into the retirement plan offered by your new employer. 4) Open a 401k Rollover IRA account with another broker or mutual fund of your choice, and transfer all retirement funds into that account.
Choice #1 is the worst of the four unless you are in serious financial trouble, because you'll pay nearly 40% of your account in fees and penalties. Choices #2 and #3 are good options for people who prefer not to manage their own money. Choice #4 however is your best chance to achieve good returns and grow your retirement account.
When you keep your funds within an employer's plan, your investment options are very limited, to a few types of large funds, plus a couple international funds maybe, and one or two money market options. You don't have a chance to take advantage of market conditions to move your retirement savings into vehicles with the potential for higher returns.
Within a self directed IRA however, you are able to actively manage your account. You have complete access to the thousands of mutual funds on the market, as well as ETFs, stocks, bonds and any of the investment vehicles available within a regular brokerage account.
Your opportunity to profit within a self direct IRA is much greater. For example, if your employer's plan is returning an average of 8%, yet you are able to achieve higher returns with investments of your choosing, say as much as 12%, with a $50,000 account, that means you could retire with an account more than double the balance if you'd have left your account with your employer's plan.
The possibilities of growing your account by switching your retirement account into a 401k rollover, can make a huge difference for you financial future.
When you switch jobs or retire, a Rollover IRA gives you a choice of investments going forward that are not available in an employer-sponsored plan. A self-directed IRA allows you to structure your retirement portfolio to increase the growth of your retirement savings.
About the Author:
Want to learn more about how to grow your nest egg in a 401k rollover by opening a self directed IRA - Jane Calhoun reports at savingcashtips.com.
