Upgrade your investments
Many business now offer 401k programs as an incentive to working for them. These plans are a way to encourage their employees to get some of their money invested in the stock market in order to let it grow for retirement. Many company’s even offer matching funds when you choose to invest in their 401k offerings. Essentially this is free money for you. However, if you lose your job you will need to rollover your 401k into something else. Usually your choices are another 401k with another company or you can have your 401k rollover to Roth IRA.
A Roth IRA is a form of investment that is used for retirement purposes. Generally speaking it is similar to a 401k in that it takes your investment dollars and spreads them around the market. A Roth IRA seeks to diversify your money for you and thus create a better safety net for that money. When you have your 401k rollover to Roth IRA, you will lose some of the benefits, such as the matching funds. However you will also gain some benefits, primarily tax ones. When investing in a Roth IRA, you will be taxed on the contributions on the front end of the transaction, however you will not be taxed when you withdrawal your funds at retirement time.
One drawback to a Roth IRA is that you will not have access to the funds at all times. In fact except for a few exceptions you will not be able to withdrawal your funds penalty free until you are the age of 59 and a half years. For some people this is a good thing in that it may prevent them from reaching into funds that are suppose to be used for retirement. The unfortunate truth in the modern day is that a majority of people do not save nearly enough money for retirement, so it is a smart idea to fully fund your 401k to the best of your ability. There are limits to the amounts that you can contribute to your 401k and to your Roth IRA, but it is always a smart idea to have your 401k rolled over to a Roth IRA when you are changing jobs.
If you have been recently terminated, then you should ask your employer what your options are relating to rolling over your current 401k.
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