What Can I Transfer My 401k to Without Losing Money?

What can I transfer my 401k to without losing money

Bankrate has identified the best brokerage and robo-advisor solutions to facilitate transferring your old 401(k) money into a new one.

Follow your institution’s guidelines in order to avoid tax complications, and seek professional advice prior to making any major decisions.

What is a 401(k) plan?

A 401(k) plan is a retirement savings account that allows workers to set aside and invest a percentage of their wages before taxes are withheld, while some employers may even contribute funds on behalf of employees.

Most 401(k) plans provide employees with an extensive array of investments that can help diversify their risk exposure. Employees can borrow against their 401(k), with assets required to be returned in five years or less.

When switching jobs, your 401(k) may be converted to your new employer’s plan or into an individual retirement account (IRA), Roth IRA or Simplified Employee Pension (SEP) IRA depending on which option best fits your needs – fees, services and distribution choices will differ according to which option is chosen; generally it’s wiser not to cash out your funds immediately as any remaining balance would be taxed as ordinary income when withdrawing it from its account.

What are the benefits of a 401(k) plan?

Stowing retirement savings in a 401(k) plan offers significant tax advantages. Your earnings accumulate without being taxed, and many employers offer matching contributions that further expand your nest egg. Furthermore, borrowing money against your 401(k) is also allowed (with some restrictions), and when retirement arrives you’re entitled to take out at least some minimum amount per year from it.

As part of your career transition, it’s crucial that you understand all the options for managing your 401(k) plan balance when changing jobs. Options could include leaving it where it is, moving it over to your new employer’s plan or an IRA account or cashing it out altogether. When making any decisions involving these funds, be mindful that they could have long-term ramifications; for instance if taking out distributions before age 59 1/2 could incur income taxes and possibly penalties of 10%; this decision may also limit future investment opportunities so it would be prudent to consult a financial expert before making decisions that involve moving funds between employers or accounts when switching jobs.

How do I transfer my 401(k) to another plan?

When switching jobs, you have various options for transferring your 401(k) funds. A direct rollover is the most popular approach as this keeps all of your funds organized in one location while avoiding taxes and penalties.

Indirect rollovers may also be available, though you must abide by certain rules to avoid taxes and penalties. For instance, your money must arrive in its new account within 60 days or else your old plan may withhold 20% for taxes and penalties.

Keep the old plan if it provides superior investment options compared to your new employer’s plan, however if it has high fees or is underperforming it may no longer be worthwhile for you to maintain it and is best considered for rollover into an IRA where thousands of investment options await you.

How do I transfer my 401(k) to an IRA?

At any point in time, you can switch your 401(k) account over to an IRA – though how you do it can make all the difference. Direct rollover is generally advised: this way the funds from your old retirement account are directly sent over to the new custodian in an effort to prevent you from touching it and also avoids mandatory 20% withholding taxes that apply upon conversion.

Your new IRA provider may have specific instructions on how to transfer assets between trustees. Or alternatively, consider using trustee-to-trustee transfer.

If your current employer provides access to financial planners, transferring into a new plan may be simpler; but before making any definitive decisions it’s essential to carefully consider all available options – making the correct selection can make an enormous difference to your future success.

Raymond Banks Administrator
Raymond Banks is a published author in the commodity world. He has written extensively about gold and silver investments, and his work has been featured in some of the most respected financial journals in the industry. Raymond\\\'s expertise in the commodities market is highly sought-after, and he regularly delivers presentations on behalf of various investment firms. He is also a regular guest on financial news programmes, where he offers his expert insights into the latest commodity trends.

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