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A 401(k) rollover is the transfer of funds from a 401(k) to an individual retirement account (IRA) or another 401(k). Usually, funds must be deposited into the new account within 60 days of being removed from the old account according to the Internal Revenue Service (IRS) rules for 401(k) rollovers. If you leave a place of employment where you had a company-sponsored 401(k), you will need to decide what to do with the funds in your retirement account. There may be numerous options available to you for your 401(k) rollover, including a 401(k) rollover to a new employer’s plan or a rollover into an individual retirement account, called an IRA rollover.
A 401(k) rollover to an IRA has excellent benefits. A rollover 401(k) benefits to an IRA include having more diversity in investment selections than a standard 401(k) plan and potentially having lower account fees. Many IRAs do not charge any account fees whatsoever. A 401(k) rollover to an IRA is essentially broken down into four distinct steps:
A financial advisor is someone who can help you decide where to allocate funds for investments and which kind of account will work best for you and your individual needs. A Roth IRA rollover will be taxed upon completion. A traditional IRA rollover is tax-deferred. However, if you do a Roth 401(k) rollover to a Roth IRA, you will not incur any additional taxes because they are the same type of retirement account from a tax standpoint.
401(k) Rollover Rules
401(k) rollover rules vary based on certain factors. For example, the kind of 401(k) and type of account you want to rollover your 401(k) into will make a difference as to the amount of taxes you may need to pay, fees you may incur, as well as any other consequences. This is why it is essential to get a financial advisor involved in your 401(k) rollover. A financial advisor will know the ins and outs of 401(k) rollover rules and guide you to make the best decision for you and your unique situation. Financial advisors can also help you to avoid an unexpected tax burden. Some things to keep in mind as you navigate your 401(k) rollover are:
The most important thing to remember when you have a 401(k) rollover to complete is that there are a few things that you must consider before finalizing your 401(k) rollover. Fees, the range/quality of investments in your 401(k) versus an IRA, and the 401(k) rules are a few examples. Remember that you must take action swiftly because not doing so can cause unnecessary fees during a 401(k) rollover. If you are unsure, confused, or even overwhelmed by the many options available to you, call us today, we can help. Utilizing a financial advisor will alleviate any stress or concerns you might have and open you up to information that you may not have access to normally.