401k Rollover IRA Info.com

1. Am I still working with the employer who facilitated the 401k plan?

• This is important because as long as you are still working with the employer who provides the 401k plan, you cannot rollover your 401k into another account.
• If you are not currently working for the employer, you will not be able to contribute to that 401k plan and at this time you can initiate a 401k rollover into an IRA account or rollover your 401k into your current employer’s 401k plan to consolidate your assets.

2. Do I have any emergency accounts?

• Emergency funds are very important for the rainy day situations. If you lose your job, a tree falls through your roof, etc., you may need to have access to money quickly.
• Many 401k plans to not offer the opportunity to make partial withdrawals, so you may be stuck taking everything out.
• Also, there may be a mandatory 20% tax withholding.
• To play it safe, the best thing to do is initiate a 401k rollover to an IRA account for the flexibility of making withdrawals.

3.  Am I unhappy with the current performance or investment structure?

• One thing you cannot control in your 401k plan is the investments to choose from. It is up to your plan administrator to choose a mix of investments and usually it boils down to a bunch of mutual funds and a stable value fund.
• Usually you will not find a bunch of great performing funds in a 401k plan, and the funds will always be very broad. So, if you like to invest in gold, or maybe China for instance, you won’t be able to do that in your 401k plan.
• Also, none of the investments in a 401k are FDIC insured. If you want to add that protection, because you are afraid of losing your money, you may want to rollover you 4o1k plan into an IRA and invest in CDs.

4. Do I want to put more money into my 401k plan?

• This depends on if you work for the company still or not. If not, as mentioned earlier, you cannot contribute to the plan anymore.
• So, if you plan on adding more money to your retirement fund, do a 401k rollover to an IRA. You will be able to contribute up to $5,000 ($6,000 if you are above age 50) per year as long as you have earned income.
• If you still work for the company it is advisable to contribute at least up to what your employer matches, and then start an IRA account so you can have more diverse investment options.

5. Do I want someone to watch over my money?

• 4o1k plans do not offer the help of a financial advisor. If you do not have time or just don’t understand your investments, rolling over your 401k to an IRA will grant you access to whomever you would like to watch over your money.
• Make sure you trust the person who you choose. Some people will charge more than others as well as different financial institutions. An IRA account at a bank will have less fees but fewer investments options than an IRA account at a brokerage firm.

The main thing to take from this is that if you are not working for the place you had your 401k with, roll it over. It’s a no brainer. You will be able to contribute to your retirement fund again, have the flexibility to take money out when you need it, and have access to a financial advisor who can end up saving you a ton of money in the long run.

Please, if you have any specific questions or situations you would like help with, leave me a comment or send me an e-mail and I’ll respond ASAP.

Ok consider this: You have been working with the same company for 20 years and only have the 401k through them as your only retirement account.  You didn’t need to contribute to any other account because you were allowed to put in $15,000+ (up each year for new tax laws) and deduct that amount off of your total income.

While you are working for the same company you should look at this as your “accumulation” phase. You are still working and you have income coming in. If you have an emergency you can always take a loan against your 401k rather than taking money out and use your income to pay off your loan, right?

Now, during this time as I have mentioned yes you may have had limited investment options, and they may have not been the best performing options, but you still didn’t need to do a 401k rollover to an IRA (technically you also couldn’t), because you have a higher contribution limit and get I shares of mutual funds. (I will explain what I shares are later, but it basically means you didn’t pay a fee to get in, similar to a no load.)

Now had you rolled your 401k over, you may have had to buy into new mutual funds or get invested into some product that had high expenses, because of what some shady advisor told you to do. You also were limited in your contributions (about a 1/3 of what you can in your 401k, also based on income).

So, essentially the accumulation phase is where you want to invest in your 401k (at least up to the match).

Now, one day after working for 40 years you decide to do what everyone else does: retire. This is the key time in your life when you should consider a 401k rollover to an ira account for flexibility. You can now invest in whatever you want, take money out whenever you want, and pick whomever you want to help you manage your money.

This is what I’d like to refer to as the “distribution” phase of your life. You won’t be going back to work and will not be adding money to the account, so the lower contribution limits won’t hurt you that much. A 401k plan is going to be more helpful for the younger working person than a retired person.

Also, if you have worked at more than one place, you will have multiple 401k accounts and will want to initiate 401k rollovers to an IRA to consolidate your assets together to make everything easier to manage.