Options to Consider for a 401 k Rollover
When you switch jobs or are getting ready to retire, there is a long list of critical decisions you will need to make; one being what to do with your 401 k. To ensure you fully understand your options for a 401 k rollover, we have created a summarized list to give you a few ideas of options to consider.
4 Options to Consider for a 401 k Rollover
#1: Leave the Money Where It Is
Just because you switch jobs doesn’t mean that you have to take your existing 401 k with you. Depending on your former employer’s policies, leaving your money where it is may be beneficial. However, when you do this, it is essential to remember that:
- You will not be able to make new contributions to the account
- You may not be able to take a loan from the plan
- You may have higher fees as an inactive former employee
- You may not have as much control over the plan
- You may not qualify to keep your plan at all
- You may forget about it over time
#2: Roll the Money into Your New Job’s Plan
Your second option is to complete a 401 k rollover from your former employer’s plan to your new employer’s. By doing this, you can continue making contributions and building your retirement account at your new job. However, we want to caution that just because one can complete a 401 k rollover, they should thoroughly examine the options prior to making a decision. It is vital to check that the new plan has the following:
- Plenty of investment options
- Fees that aren’t too high
- Rollover eligibility
- An open or upcoming enrollment period
#3: Roll the Money Over into a Retirement Account
Depending on your unique circumstance, whether you are switching jobs, got laid off, or are retiring, you have the option to complete a 401 k rollover into a retirement account. When you roll over your 401 k into a new account, no taxes are due and new earnings are typically tax deferred.
Considering the option of rolling some of all of your money into a fixed index annuity is a good option to discuss with your financial advisor. An annuity can provide eligible people with guaranteed lifetime income while lowering the impact of market risk.
#4: Take the Cash Value Out
Another option to consider, is to take the cash value of the money from the account, although this option is highly discouraged. Cashing out your 401 k is a costly choice where you can lose up to 50% of the account amount due to taxes and penalties.
There is the option of taking the cash out value for immediate emergency expenses and returning the money to a retirement account within three years. However, there are strict regulations, and it is common for individuals to fail the required timeline. Therefore, we recommend you consult a financial professional prior to making any decisions regarding your options to consider for a 401 k rollower.
We are Here to Help
We understand that the ins and outs of financial planning can be confusing and time-consuming. Rather than risking your hard-earned money, you can trust us to guide you in the right solution for your unique situation. Contact us today to learn more about your options to consider for a 401 k rollover!