Money Management Guide » 401k rollover

401k Rollover at a glance

GuestPoster — Thu, 25 Nov 2010 16:29:00 +0000

401k plans are nest eggs for the future, they start when you start your employment. Both you and your employer contribute to this fund till you are employed in that particular company. When you want to leave the company, you have to decide what you want to do with your 401k fund. A very common option is to rollover 401k into an IRA account due to its favorable impact on taxes. It is still advisable to look into all the options for 401k rollover and the fee structure associated to each option before making a decision.

The easiest one of the 401k rollover options is to take cash out. The check for the net amount will be in your favor after deducting federal and state taxes. Your employer will also hold back 20% as withholding taxes. Other options for 401k rollover is to either directly or indirectly open an IRA account. Direct 401k rollover is when your employer makes out the check for the discount broker with whom you are opening an IRA account and an indirect method is when the check is given to you and you have 60 days to open and start up an IRA account.

Control is one thing people look for when opening and maintaining investment accounts. By doing a 401k rollover to IRA account they get exactly that. You have the authority to choose your custodian and set up your own investment objective. Your portfolio’s risk levels are as per your investment philosophy and criteria. You also get the advantage of getting information from professionals within your brokerage house. 401k rollovers help in reducing expenses as they usually only trade in mutual funds. Another advantage of 401k rollovers is that they aid is consolidating accounts. If you have moved between a couple do jobs, you can operate just one IRA account.

Before making a final decision it is always good to know 401k rollover rules and speak to a professional who can guide you in the right direction.

What Do I Do With My 401K?

GuestPoster — Wed, 31 Mar 2010 19:06:14 +0000

So I am sitting out in the yard with my mother-in-law and she is telling me about how she is most likely going to get laid off soon and shes trying to get a game plan in place. One of the first questions she asks me is “what do I do with my 401k?”. This is a pretty common question asked by many people today because of our economy’s downturn. Usually most people only have to think about what investments they will make in their 401k because leaving the company is the last thing on their mind. The first thing I said to her is you want to rollover your 401k. The last thing you want to do is cash it out.

I explained to her that essentially if you touch the money yourself, meaning your current employer sends you a check for the amount of your 401k, you will be taxes heavily. It will be an instant 20% withholding that your company is obligated to take before you even see the check. You have 60 days from that point to redeposit it into a new account, but if you forget and do not meet that 60 day time-line you are going to be penalized again. So the best thing to do is to roll it over. Sometimes people are not sure where to get 401k rollover info and so they sit idle, not knowing what to do. I also informed her that if she was not sure what she wanted to do with her funds, she should ask her current employer about leaving her investments where they are until she has found a new home for them.

We never know what life is going to throw our way. Investments go up, they go down, but the goal is to not panic. Making rash decisions can cost you a lot in the long run. Being informed and knowing the proper steps to take can make a big difference.

Planning Your 401k Rollover

GuestPoster — Fri, 29 Jan 2010 20:00:04 +0000

It happens to 97% of us — changing jobs. The average American will hold three jobs during the adult working years. Job transitions, whether by choice or not, come with a lot of paperwork. One piece of paperwork you don’t want to neglect is your 401k rollover.

It might seem like one more thing in a pile of things. You might think What’s the harm in leaving it alone? There are several very good reasons to pay attention to that account. Even if it is only $500, you need to plan to roll the account over and into a new account. You can use a 401k rollover to fund an individual retirement account (IRA) or a Roth retirement account. These could be wise choices, even if you are going from one company to another. You are allowed to have more than one retirement account.

So what planning is involved in the 401k rollover process? First, do you have any loose ends to tie up? Did you ever borrow against it? Take a loan for school or home repairs? The balance will be due and if you default, you take a stiff tax penalty.

Next, do your homework on where to land the money. As I said, you can choose to roll it to a new 401k account, at your new company. You can decide that a 401k rollover to IRA is the right answer. With the first scenario, you need to be ready to decide how the money is divided among the various funds. Do you go growth? Or small cap? You need to explore your options. If you have decided to roll the money into an IRA, either traditional or Roth, you need to do some research on the firms available to you. Do you want to use Schwab or Vanguard or someone else entirely?

Do not let the stress of job transition keep you from making these important plans. Take the time today to help ensure that your tomorrow is secure. A few minutes spent today will be worth thousands tomorrow.