How to roll over your 401(k)Date posted: 5/17/17 09:15:00 AM
Rolling over an employer-sponsored 401(k) plan can be intimidating – especially if it is your first time doing so. However, this task isn't that difficult if you know what you're doing. Take the time to learn a little bit about this critical aspect of your finances and ensure you don't miss out on retirement funds.
Find out how much is in your account
Before you do anything, U.S. News & World Report indicated you must find out how much money is in the account. In addition, you'll want to determine how much you and your employer both contributed as well as the account growth.
Knowing exactly how much is in your account will help you determine what to do within the regulations and rules associated with your 401(k.)
Consider all of your options
When you leave a job, you have a few options when it comes to your 401(k.) You can roll the funds into an Individual Retirement Account, transfer the money to another plan from your new employer or take the money and leave it all behind with your old employer for the time being, noted Bankrate. Obviously, you want to make a decision that is most appropriate for you, so take the time to carefully consider each option.
In addition, consider the rules associated with your 401(k.) An account that holds less than $1,000 can be cashed out when you leave. However, if the account is between $1,000 and $5,000, most employers automatically roll your 401(k) into an individual retirement account (IRA). An account with more than $5,000 requires you to decide whether to take the money with you or leave it behind.
Benefits of rolling your money over
If you have the option to roll your money over to an IRA, it might be more beneficial than leaving it in an old 401(k.) Leaving it might mean you have to pay high fees due to mutual funds, and you sacrifice flexibility. An IRA is often a suitable alternative.
"The fact that you can essentially invest in almost anything is a major benefit with IRAs," said Nick Kaster, senior analyst at Wolters Kluwer, according to Bankrate. "With 401(k)s, you're limited to investments that your employer provides and, in some cases, they may not be good."
If you decide to roll over to an IRA or move to your new employer's plan, be sure to set up the new account. Reach out to your financial advisor to ensure you take the appropriate steps for a seamless transition.
Make your move
When you decide how you will deal with your retirement money, you'll want to initiate the action. Have a check made out to the new investment advisor or the appropriate party. After the funds make their way to the appropriate account, schedule a future review of your portfolio to track how your money is working for you and your retirement.
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