One of the things you can do with your 401(k) account after leaving your job is rolling it into an Individual Retirement Account (IRA). Cashing out your current balance, leaving it with your old company, or rolling it into a new 401(k) plan are other options of what you can do with your balance after quitting a job. So, if for whatever reason you are leaving your current employment, it’s important to know the benefits of rolling a 401k into an IRA so that you can make the best choice regarding your retirement income.
At The Financial Architects, we advise our clients whenever they need to make decisions that affect their financial well-being. Retirement savings and insurance policies are some of the financial security matters that we deal with.
What are the Advantages of Rolling a 401(k) Into an IRA?
The benefits of carrying over 401(k) funds into an Individual Retirement Account are:
- More Investment Opportunities – Most IRAs come with more investment opportunities compared to a typical 401(k) plan.
- Fewer Maintenance Costs – Many 401(k) plans charge account fees. This is something that you’ll not find with a lot of IRAs. These costs can add up to a significant amount throughout your work life until retirement, so avoiding them is a brilliant financial decision.
- Better Communication – With an IRA, you’ll be well informed about everything going on with your account. This is different compared to leaving your retirement plan balance with your former employer, as you might not be in a position to receive updates concerning the plan.
- Fewer Regulations – The IRS sets regulations governing IRAs. This means that all the providers have almost the same rules, unlike companies that set their plans uniquely.
In order to decide whether an IRA is the best option, you should compare all these factors with your current 401(k).
When is the Best Time to Rollover Your 401(k) into an IRA?
Rolling over your savings into an IRA is a great idea if:
- Your new job doesn’t offer a retirement savings plan. An IRA is the best option to continue making savings if you wish to withdraw your balance from your previous employer.
- You have found an IRA that offers better incentives that your 401(k) plan. In such a situation, an IRA allows you to continue making contributions towards your retirement while getting the most out of the investments.
How to Rollover Your 401(k) Into an IRA
The following steps can guide you on how to go over the process of transferring your balance into an individual retirement account.
- First, you have to decide which account the money is going to be deposited in. The two choices you have are a traditional and Roth IRA. If you don’t have an account already, you have to open one.
- Next, ask your former plan administrator to make a direct rollover into your IRA. You can also choose to get a check, then make the deposit yourself.
Make Lasting Investments
Once your money is in your Individual Retirement Account, you have to make investments. With a variety of options available, it’s important to compare and pick the best one for you. At The Financial Architects, we can give you the insight you need on the benefits of rolling a 401k into an IRA. Give us a call today on (888) 350-5396 to speak to one of our advisors.