How to Rollover Your 401(k) to an IRA
Who can help me? What makes each company different?Many different companies are capable of helping you rollover your 401k to an IRA.
What Do I Need?Once you select a company to help you rollover your 401k to an IRA, you can initiate the process in-person or online in most instances. Banks and fund companies usually have staff to help their customers open retirement accounts. Companies doing business online usually have customer service departments to help customers with their retirement accounts. The information needed to fill out an application to rollover a retirement plan to an IRA includes Social Security and bank account numbers, date of birth, address, and employment information. Once your 401k rolls over, it needs to be funded so, bank information or other funding information is needed to initiate contributions. You will have to answer questions about your investment objectives, risk aversion, income, and net worth as well. You will have to choose the tax treatment of your IRA at this point as well. Roth IRAs allow you to have your income be tax-free while your contributions are taxed at your current rate. Traditional IRAs, however, allow the opposite; your contributions will be tax-free while your distributions will not be. The key step in rollovers is initiating the rollover on the employer’s end as well. You will have to notify your former employer that you are rolling over your 401k or other plan to an IRA and fill out the necessary paperwork to do so.
I rolled over my 401k. What now?You will have to decide how to invest your money once your plan is rolled over. Your IRA will allow you more investment freedom and a host of different asset classes will be available to you: stocks, bonds, commodities, real estate, etc. If you are not prepared to implement a plan to save for retirement, then you should get help from a financial advisor. Financial advisors are knowledgeable about different asset classes and how they interact to produce an optimal portfolio. Once your plan is implemented, it is important to update it when circumstances change.
Rolling over your 401k to an IRA is an important step for retirement. IRAs can help you to reduce your expenses, increase your returns, gain control over your investments, and reduce your risks. IRAs can help you get the best tax treatment for your retirement income as well. There are a multitude of companies offering IRAs with different positives and negatives so, do your research and speak with a professional if the choices become overwhelming.
By InvestorGuide Staff
Posted in ...Personal Finance