November 30, 2017

401(k) Rollover: What You Need to Know

In an ideal world, you would get a dream job and work with the same company until you retire. However, reality can be a bit different. Studies show that the average person today changes jobs ten to 15 times throughout their career.

So, what happens with your 401(k) after you leave your current employer?

A 401(k) rollover is the best option in this case.

What does it mean, and what should you pay attention to in the process?

Let’s find out!

 

401(K) Rollover Options

Rolling over your funds is never an easy decision, so you need to weigh your options carefully. A safe choice would be to ask for professional help and get assistance in the process. If you can’t afford to hire a financial consultant at the moment, then you should keep in mind the following options regarding your portable assets.

  • Decide Whether to Rollover Your Funds or Leave Them in Your Former Employer’s Plan

If you decide to stick with your former employer’s plan, then you should know that your account remains subject to their plan rules and changes. That may include additional costs or different investment choices than the ones you opted for already.

  • Opt for a Roth IRA

Here’s an excellent 401(k) rollover, especially if you are heading into retirement. Not only is rolling your funds into a Roth IRA tax-free, but you also have more investment choices. You can also choose to consolidate multiple accounts into a single Roth IRA.

With a Roth IRA account, you can get a tax-free income in retirement. Moreover, you won’t have to pay penalties or taxes for every withdrawal you make.

It is important to mention that at the time of conversion, some assets may be subject to taxes.

  • Cash Distribution

Cash distribution can also be a sound option, especially if you are facing financial needs at the moment. Keep in mind that although this may be a good idea short-term, you need to be aware of the consequences. For example, you can expect to pay harsh withdrawal penalties.

 

401(K) Rollover – What to Do Next?

Feel free to ask one of our professionals at Exemplify Financial. We’ll be more than happy to provide you with useful information and the best guidance for your 401(k) rollover.

 

Sources:
https://www.schwab.com/public/schwab/investing/retirement_and_planning/understanding_iras/rollover_ira/401k_rollover_options
https://en.wikipedia.org/wiki/Defined_contribution_plan
https://en.wikipedia.org/wiki/401(k)
https://www.investopedia.com/ask/answers/101314/what-401k-rollover.asp

 

 

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