When you decide to leave a company that you have been working for, you have to consider some options related to your 401k plan. There are basically three options for you to choose from: withdraw all the money in your 401k account, keep your current plan, or transfer it to another retirement account. Other retirement accounts include your new employer’s 402k plan, Roth IRA and traditional IRA account. Thee process of transferring your current 401k plan to IRA account is called a rollover. You should seriously consider a 401k rollover to IRA as this may be the best choice for your money.
Cashing out your 401k account is a bad idea in many ways. There will be government taxes for you to pay and your total withdrawable amount will be reduced. You may also have to pay the 10% early withdrawal penalty if you are not yet 59 1/2.
If your current 401k plan is great in terms of investment options and low fees, you can keep your current plan with the new employer. However, chances are, your new 401k plan will not satisfy many off your needs or you will find it not necessary to keep the plan. This is when you should consider a rollover to IRA.
With an IRA, you have lower investment expenses and gain access to much wider range of investment options. You can also convert your 401k to Roth IRA which is tax-free. You can switch to other discount brokerage companies to benefit from different investment options, prices, fees and promotions.
You should definitely consider a rollover from your 401k plan to IRA to take advantage of the chance to lower your costs, avoid taxes and widen your investment possibility. If you are unsure about the detailed process, you can consult a professional to understand the issue well and take the appropriate action. You can also consult your current employer for his advice.
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