Reasons to Roll a 401(k) into an IRA if you are Changing Jobs
There Are More Investment Options
- You can Get the Roth
- You Can Contribute to Both
- You Can “Borrow” from Your Roth IRA
- You Might Get Some Free Cash
- There Are Far Fewer Rules
- You Have Estate Planning Advantages
- The Rollover Is Free
In addition to rolling over your 401(k) to an IRA, there are other options. Here is a brief look at all your options. For additional information and what is suitable for your particular situation, please consult us.
- Leave money in your former employer’s plan, if permitted
- Pro: May like the investments offered in the plan and may not have a fee for leaving it in the plan. Not a taxable even.
- Roll over the assets to your new employer’s plan, if one is available and it is permitted.
- Pro: Keeping it all together and larger sum of money working for you, not a taxable event
- Con: Not all employer plans accept rollovers.
- Rollover to an IRA
- Pro: Likely more investment options, not a taxable event, consolidating accounts and locations
- Con: usually fee involved, potential termination fees
- Cash out the account
- Con: A taxable event, loss of investing potential. Costly for young individuals under 59 ½; there is a penalty of 10% in addition to income taxes.
Be sure to consider all of your available options and the applicable fees and features of each option before moving your retirement assets.
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