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It’s a rare event to stay in one job, one career path for one’s entire work career. When you’re in your twenties and thirties, you may not give a second thought to that money your employer has nicely tucked aside for you in a retirement plan, but as you near your forties and beyond, it would be nice to know what to do with those old 401K plans as you prepare for retirement.

As you change jobs, you must decide what you are going to do with an old retirement plan. If you don’t like the terms of your new employer’s plan, consider rolling over to an individual retirement account, or IRA.


Why rollover?

There are numerous benefits to rolling over your 401K plans to an IRA. With an individual retirement account,


  1. You get more investment options

With a traditional 401K, your mutual fund options are more limited. Employers typically don’t give more than 24 fund choices in a 401K, and your ability to move money around comes with certain rules and restrictions. an IRA lets you choose individual stocks and alternative sources of investments as funding for your account. These alternative sources can range from Bitcoin to real estate, and you’ll have a much wider choice of index funds and exchange-traded funds, both of which are missing from 401K plans.


  1. You’ll be charged lower fees

Your company may cover fees charged by a 401k plan while you work for them, but all bets are off once you switch jobs. You may never be able to escape fund expense ratios, but you can reduce administrative fees as you roll over to an IRA.


  1. You may want a Roth account at some point

If your 401K doesn’t provide a Roth option, you may choose to roll savings over to a Roth IRA. Some of the advantages of this type of account include:

  • You’ll avoid income restrictions
  • You’ll enjoy tax-free withdrawals in retirement
  • You’ll have access to death benefits
  • There are no required minimum distributions

There are tax implications of rolling over a 401K into an individual retirement account. If you received tax savings from contributions to a 401K, you’ll need to make up for that when you roll into a Roth, which is traditionally funded with after-tax dollars.


How to roll over funds

If you are ready to make the switch to an IRA, take these steps to make the transition smooth and simple:

  1. Choose your rollover destination–do a bit of digging on the benefits of a traditional IRA vs. a Roth IRA. If you need assistance, contact your financial planner to help navigate the benefits and drawbacks of each.

  2. Pick a provider–Many financial companies offer both automated investment options as well as personalized services at the hands of a qualified financial planner. If you’re more hands-on, consider choosing a company that offers personalized, customized services.

  3. Be a point of contact between your old 401K and your new IRA providers—Give detailed information to each party so you can make the transition as smooth as possible. Do your best to provide accurate records and account information in an attempt to make sure your money ends up where you intend it to.

  4. Continue making smart choices while investing–Keep up those good investing habits and build your future for retirement. Setting aside a portion of your paycheck for the purpose of building future financial stability is going to give you peace of mind that you are planning well for your future.