Rollover 401k When Changing Employers

The trend to rollover 401k policies into a different type of retirement account is now gaining pace. If you are about to switch jobs it would be the perfect opportunity to take a step back and analyse which option would be the most desirable. Be aware that if you change your job and do not move your 401k plan, your original employer would be legally allowed to penalise you financially.

When the time has come to open a new retirement account, you will have to decide which option would best suit your retirement and investment goals and aspirations. Of course you can choose a new 401k account if you so wish, or if you prefer there is the possibility of rolling over to an IRA.

Choosing to convert a 401k to an IRA has become a popular choice and for good reason. With an IRA there would be greater investment options than you had with the 401k policy. If you would like to exert greater control over how your savings are invested you can do so with an individual retirement account. It would provide you the freedom to choose an investment instrument that matches your preferences and situation, this would not be the case with a 401k as the scope for influence is extremely low.

If you are interested in converting your 401k to an IRA (aka gold ira rollover) you will have the choice between two types of accounts, namely a traditional IRA or a Roth IRA. With the former your contributions would be tax deductible, whereas with a Roth account this would not be the case.

Always do as much analysis as you can prior to making a decision, it is not a task that should be taken lightly. If possible consult an investment advisor as well as a tax advisor before making a final decision. Any 401k rollover will have an impact on your retirement plans and potentially your tax liability.

It is worth noting that you will need to get hold of a policy document from your past employer which you will need to complete with information relating to how you would like to rollover the 401k. If the employer is not forthcoming with the document seek legal assistance immediately as you would not want to jeopardize your savings. As a general rule, most rollover plans would also require spousal consent before the funds are transferred.

The plan document and 401k statement should allow you a clear understanding of the capital that is currently held as well as the rules that govern the rollover. Read all the information thoroughly so as you are aware of all the consequences.

If you opt for an indirect rollover and actually receive the funds personally, you must deposit these into a new IRA account within a sixty day period or you will be hit with withdrawal penalties and charges. Most people would opt for a direct rollover as this is thought of as a less risky option and not as complicated. Whatever you decide, do so only after careful research and analysis of all the factors and considerations.

Published by

Michael Brown

Michael Brown

Retirement planning expert and rollover IRA to gold adviser.