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Employee 401k rollover

Should you roll over your 401(k) to an IRA when you change employers? A rollover allows you to delay paying taxes on your investment as it accumulates and avoid an early-withdrawal penalty. If your old company has an exceptional 401(k), you may not want to roll your retirement fund over to an IRA. Consider the following before you decide to roll over your current 401(k).

 
401k Rollover Fees

Rollovers are a wise move if the IRA charges lower fees than the 401(k) plan at your old or new job. Sometimes the IRA is a better deal, especially if the 401(k) is through a small business. Large companies negotiate institutionally priced investments with lower costs than individuals can get on their own from retail IRAs. Low expenses make those 401(k)'s a much better place to keep your investment.

 
401 (k) Rollover Transfer penalties

If you are going to move your 401(k) to an IRA or your new 401(k) plan, you need to watch out for penalties. You can save a lot of trouble—and money—by having your former employer send the cash directly to the new financial institution.  If you take the old 401(k) into your own hands, your employer will cut you a check for the balance, minus 20 percent withholding for income taxes in case you decide to keep the money. Then, you generally have 60 days to put the cash into a qualified tax-deferred account. If you don't, Uncle Sam will keep the 20 percent (plus any additional amount you owe at tax time). This also means you have to come up with the absent 20 percent if you want to roll all of the distribution into an IRA.  

 
Rollover 401(k) Investment options.

IRAs almost always have more investment choices than 401(k)'s. The pro for rolling your 401(k) over into an IRA is diversification. In an IRA, you can invest in individual stocks, bonds, and any mutual fund you want.  Savvy investors may enjoy the freedom of an IRA. Conversely, retirement savers who aren't likely to peruse their mutual fund prospectus regularly might enjoy a smaller array of options already set by their employer. The choices have already been limited to a reasonable number.  If you are satisfied with your current investments, you should consider leaving your 401(k) with your old employer.

 
Taking a loan and your 401-k Rollover

Tapping in to your retirement funds early to cover current expenses is never a good idea. But if your back is up against the wall financially, you can generally take loans only from a 401(k) and not from an IRA. If you roll it your 401(k)over to an IRA, the only way you can get access to your money is to pay taxes and the penalties.

 
Estimate your retirement age and the effects of rolling over a 401k

With an IRA, there is a 10% penalty if you make a withdrawal before age 59½. But retirees can begin taking penalty-free withdrawals from their 401(k) at age 55.   At age 70½, retirees must take required minimum distributions from their retirement accounts. There's one exception: If you're still working, you don't have to take the distribution from a 401(k)—and pay the extra taxes that year—unless you own more than 5 percent of the company.

 
Estate planning and 401k rollovers

Most 401(k) plans will force your heirs to take the assets soon after you die, which can be a big tax burden on your loved ones. Some 401(k) plans allow only spouses to roll inherited 401(k) dollars into an IRA. If your employer's 401(k) plan doesn't make it easy for your heirs to space out the tax payments, you might want to roll over the money into an IRA.

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