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401(k) rOLL-OVER

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If you are changing jobs, or getting ready to retire from work, you are probably considering options for your 401(k) plan assets. Chances are you will consider leaving your plan with your current employer; rolling (or moving) your assets to your new employer or “rolling over” your assets to an Individual Retirement Account (IRA).
A 401(k) rollover refers to the process of transferring or moving your assets to an IRA or another tax-advantaged retirement account. A rollover typical happens when you change jobs or retire. It is also a great way to consolidate your accounts if you have multiple 401(k) plans or IRA’s.

There are two types of rollovers:

  • Direct Rollover – A direct rollover happens when you transfer your money electronically from one account to another 401(k) or Individual Retirement Account (IRA).
  • Indirect Rollover – An indirect rollover happens when you are given a check from your 401(k) account and you deposit the check into your new account, i.e. new employer 401(k) plan or an Individual Retirement Account (IRA).

Is rolling over a 401(k) worth it?

  • Unlock new investment choices. Rolling over your 401(k) account(s) helps you access more investment options; especially if your former employer had a limited selection;
  • Reduces administration fees. If your employer’s 401(k) plan administrative fee charges are high or the investment choices have high expense ratios, then a review of your 401(k )rollover options may be important to rollover your assets to another 401(k) or IRA to save on cost;
  • Consolidating your 401(k) accounts. Most employees, especially those who have moved from one employer to another, have multiple 401(k) accounts. Tracking the accounts can be cumbersome and complex. Rolling over the accounts will save time and money.

401(k) Rollover Rules

When leaving a job, there are key factors to consider regarding 401(k) rollover rules. The administrative fees, range, and quality of your investments compared to an individual retirement account (IRA). A rollover has its own rules that should be clearly understood.

You have 60 days from the date you receive a retirement plan or individual retirement account (IRA) distribution to roll it over to another plan or IRA. Failure to meet the 60 day rollover time-period may result in penalties and additional taxes.

401(k) Rollover Options

If you are switching jobs, you may move your retirement savings from your previous employer to your new employer; dependent on the new employer’s plan provisions. Rolling your account to a traditional individual retirement account (IRA) allows flexibility in managing your savings. Rolling your account to an IRA helps you continue to save for your retirement. When considering your options to leave your assets with a former employer, review your options with a Fiduciary Registered Investment Advisor to help you make a decision that is in your best interest.