401k Rollover to IRA

Before quitting your current job, you need to decide whether you want to cash out your 401k plan or move to another retirement plan. A retirement plan in your new company could be a new 401 k plan, an IRA plan or a Roth IRA plan. The transaction of your 401 K to an IRA (Individual Retirement Account) plan is called rollover. Many people before leaving a company cash out for various reasons; here we will discuss why you should refrain from doing so.

401k rollover to IRA

gold 401k rollover

Cashing out Fund: A Bad Idea

The worst thing you can do with your retirement savings is  cashing it out. Unless it is hugely needed, let it rest in peace. When you cash out your 401K, you will be suddenly slapped with a hefty tax. Along with that, you may have to pay a 10% early withdrawal penalty if you are not yet 59 1/2. Here is an example of why you should never think of taking out your fund. If the combined federal and state tax rate is up to 35%, it means taking a sum of $100,000 out of your 401k can make you pay $45,000 in taxes and penalties, leaving a cash amount of only $55,000 to you.

Think about Rollover: The Best Option Left

When it comes to rollover from a 401k rollover to IRA; you are getting much lower investment expenses and providing yourself with wider investment options in the market. You can make a switch to varied discount brokerage firms to earn benefits of different investment plans. In addition, you can also opt to convert your 401k into a Roth IRA, which lets your retirement saving be tax-free. If your current employer has provided you a great 401k plan with ideal investment options and low fees, then there may be no need for a  401K rollover.

401k Rollover to IRA procedures

  • Open an IRA with a reliable financial institution offering IRAs: Choose a financial institution that has plenty of  investment options for your savings. Generally, an ideal investment plan is accessible at low trade commissions and fees.
  • Tell your boss that you are interested in a 401k rollover to an IRA: Ask your employer to make the check payable to the investment company that you have chosen. It is also referred to as trustee-to-trustee transfer, which can help save up to 20% in tax with-holdings.

Lastly, when considering a 401K rollover to IRA you want to take full advantage of the opportunity. Do some research on Investment Companies in advance and consult with a  professional, after all it is your hard earned money.

Published by

Michael Brown

Michael Brown

Retirement planning expert and rollover IRA to gold adviser.