Rolling Over Your 401k to an IRA: What You Need to Know

When you're ready to move on from your current job, you may be considering rolling over your 401(k) into an IRA. This can be a great way to reduce fees and gain access to a wider range of investments. However, there are some important things to consider before making the switch. Here's what you need to know about transferring your 401(k) to an IRA.In most cases, there is no transfer fee when you move your 401(k) into a new tax-advantaged retirement account.

However, the fees associated with the new account may be higher than those of the old account. That's why it's important to do your research and find the best place to transfer your 401(k) to an IRA.When you convert a 401(k) into an accumulated IRA, you can benefit from lower fees and a greater choice of investments. However, it's important to note that if you mix IRA contributions with accumulated IRA funds in one account, it can be difficult to return the accumulated funds to a 401(k) if you start a new job with an excellent 401(k) plan. Additionally, there are contribution limits for IRAs, and if you choose a Roth IRA for your reinvestment, your ability to contribute may be further restricted based on your income.If you want to switch from one 401(k) plan to another, contact the plan administrator of your old job and ask if you can make a direct transfer.

This is generally the best option as it avoids any tax penalties associated with transferring a 401(k). If you make an indirect reinvestment, which means that the plan administrator sends you the money and you deposit it into the new account, they may withhold 20% of your check for taxes.Wealthfront is one great option if you're looking for someone to manage your transfer to an IRA. They offer a wide selection of investment options with lower costs than many other providers. Plus, when you open an accumulated IRA with them, you can contribute additional money up to the allowable contribution limit.Overall, transferring your 401(k) to an IRA can be a great way to reduce fees and gain access to more investment options.

Just remember that once you add money to your accumulated IRA, it may not be possible to transfer the account back to a future employer's plan.

Rebekah Carlucci
Rebekah Carlucci

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