IRA Rollover Introduction
You are eligible for a 401k rollover if you quit working either voluntarily or involuntarily. However, there are some plans that offer an in service 401k distribution that allows you to have a 401k rollover to an IRA while still working.
There are four main steps for rolling over to IRA. They are;
- Opening an IRA (Individual Retirement Account).
- Request your plan administrator to provide the rollover paperwork.
- Fill out all the required details in the paperwork and send it back to the plan administrator.
- When the money arrives in your IRA, you can invest it where to deem fit.
Opening an IRA account with a financial institution that offers IRA services: a good financial institution would be a discount broker. Generally, you can choose an investment institution that offers the investment type you are looking for and that offer low trading fees and commissions.
Inform your employer about your intended 401k rollover: ensure that your employer pays the check to your selected investment institution. This type of transfer is referred to as a trustee-to-trustee investment and it does not charge the 20 percent tax withholding fees.
Make the right investment: once the money transfer is complete, your money will be in a low interest gaining investment account. However, you will have to invest the money in accordance to your asset allocation plan. Your broker determines the investment options that will be open for you. Nonetheless, ensure that you invest in passively managed ETFs, mutual funds or low cost well-diversified portfolio.
- In most cases, it is advisable to rollover your 401k to an IRA after quitting your job. IRA reduces your administrative costs and offers rewarding investment options.
- If you are planning to retire at the age of 59 and you quit your job at the age of 55 or older, it is beneficial to wait and rollover your 401k when you are 59 years old.
- If your 401k bares employer’s stock, it is would advisable to consult with an accountant and see whether you can benefit from the net unrealized appreciation rules before rolling over 401k into an IRA.
- If you are planning a Roth conversion for your nondeductible IRA contributions, consider holding off your 401k rollover until an year after the Roth conversion is completed.
- The ideal place to rollover your 401k to a gold IRA is a discount brokerage firm with low or no trade charges or mutual fund Company that has low cost funds on ETFs.
Conclusion to Retirement Investing
The 401k to IRA is always the best rollover option. This is because, it allows to take advantage of an opportunity to lower your fee charges while gaining more flexibility. Remember to conduct a thorough research on the investment institutions before choosing the institution to work with. Moreover, you should be diligent and very keen when selecting the type of investment you want. If you are confused or unable to decide, it is always good to consult with a professional to assist and guide you through the process.