What to do with your old 401(k). Is an IRA rollover the way to go?

What to do with your old 401(k). Is an IRA rollover the way to go?

Should you roll over your 401(k) to an IRA?

That question may not be first and foremost during the hectic period when you leave one job and start another. But deciding what to do with your 401(k), and evaluating the IRA (individual retirement account) option, is a matter to which you will want to give some serious thought, since there is no single strategy that works for everyone.

When you leave your job, you will have several choices:

1. You can cash in your 401(k). Consider this only if you are facing dire financial problems, since you will owe taxes on the entire amount. If you are under 59½, you will be charged a 10% penalty in addition to the taxes.
2. You can leave the money in your old 401(k). If you have more than $5,000 in your 401(k), you can usually leave the money where it is. You will not be able to make new contributions, but the contributions you have already made, plus any matching contributions from your former employer, can remain as you have them.
3. You can roll over the money to the 401(k) at your new company. You may have to wait until the next enrollment period or until you have been on the job a full year. And it could require extra paperwork. But don't let these factors stop you if this is the right move for you.
4. You can roll over the 401(k) to an IRA. Many people choose this option because it offers the opportunity to pursue a wider array of investment options, allows for greater control than being limited to your current plan's rules, and it can be a way to consolidate some of your assets. Annuities have been a popular destination for rollovers since they often provide valuable guarantees not found in 401(k) plans.

When considering rolling over the proceeds of an employer-sponsored retirement plan to an IRA, keep in mind that you have the option of leaving the funds in your existing plan, if allowed, or rolling them into a new employer's plan, if one is available and rollovers are permitted. Each choice offers advantages and disadvantages, depending on the desired investment option and services, fees and expenses, withdrawal options, required minimum distributions, tax treatments, and your unique financial needs and retirement objectives.

Several factors to consider:

Read full article from What to do with your old 401(k). Is an IRA rollover the way to go?