401k into IRA; The rollover process explained

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401k to IRA can be a rather simple process if you follow the easy steps provided below in this article. Moreover, we will discuss the advantages and disadvantages to a 401k to IRA rollover.

But first, let us provide a background as to why one might choose to move from a 401k into an IRA; There are numerous reasons why people should consider rolling over their 401k into a Roth IRA or a traditional IRA, likely because they have either lost their job, switched jobs, or moving onto retirement. Below are the reasons why it makes sense to move that 401k into IRA:

  • With your old 401k your options are limited to whatever the company allowed. Moving a 401k to IRA allows you complete and instant flexibility with regards to your money.
  • It really doesn’t make sense to be bound to a small set of the market, a 401k to IRA allows you access to numerous options you didn’t have. Consider this: Typical companies only provide one investment company in which to use and they typically have no more than 15 to 20 different funds to pick from – if there are better options out there it wouldn’t make sense to stay tied to someone that doesn’t offer the best service. Don’t let someone tell you what to do with your money by limiting your options to a small set of funds or bonds or the like.
  • Most employer plans don’t allow you to buy individual stocks, whereas an IRA provides that flexibility.
  • If you were to decide to simply rollover your 401k into another 401k with your new employer, you won’t necessarily be able to take advantage of being able to control your money – as once again you will be limited by your new employers rules and policies.
  • If you were to simply leave the money with the existing plan sponsor, there maybe restrictions as to your ability to continue and contribute to the plan. If you’re retired it may not matter to you, but if you’re moving onto another job – or even looking for another job – it only makes sense to move that 401k into IRA and take control of your money immediately. Not to mention, you may have the ability with a 72t to make extended regular withdrawals, penalty free from an IRA, which you can’t do with your 401k.

Now, it would be a lie if we didn’t explain to you that there are certain disadvantages to moving a 401k into IRA, and they are as follows:

  • Most 401k plans allow you to borrow from your accumulated assets, while you do not have that option if you put your 401k into IRA.
  • You may not be able to hold onto that company stock that you’ve accumulated and you may be forced to sell it.

Now, if you’re convinced that moving your 401k to IRA investments is a good idea, you can take the following steps to get the ball rolling:

  • Contact  an investment company such as Vanguard, Fidelity, or even contact your local bank to see what options they provide.
  • Open an IRA and choose which funds to allocate your 401k proceeds to.
  • Then your plan sends the assets over.

The process really is that simple.  It’s clear to us here at 401k Maze, the pluses out weigh the minuses when it comes to rolling your 401k to IRA.  It only makes sense to weigh your options and decide what is right for you, whether that be leave your money sitting where it is (which we don’t recommend in most instances), or move that 401k into an IRA and take back control of your money – we feel you are leaving money on the table by leaving your money with an former employer. The fact is, the major reason for participating in their plan to begin with was to take advantage of the matching contributions – not necessarily to take advantage of their investment options. don’t wait another minute, the fact is, you’re probably losing money by doing so.


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