A 401(k) is a government-supported savings plan that is tax-deferred to offer people additional retirement funding options aside from the standard Social Security Pension.
The 401(k) plan allows you to accumulate savings until you leave your job or retire. The fact that the plan is tax-deferred means that savings will accumulate faster.
After leaving a job, you can roll the money over to other investments. As easy as that might sound, moving the money around in a 401(k) rollover isn't easy.
Here are your options with the 401(k) rollover and the pros and cons for each.
Those moving on to a new job often don't know which employer's plan works best for them. If you are in such uncertainty, you may decide to leave your 401(k) savings in your former employer’s plan. This move is temporary until you figure out suitable investment options and gather details of the new employer's plan.
Another option for a 401(k) rollover is to switch to a traditional IRA. This option is perfect for people going into early retirement or aging out of an employer-sponsored plan.
You could also transfer your old 401(k) to your new 401(k) if the new employer accepts the rollover.
Withdrawing all the money from the account is also a move you can make when all other options aren't favorable. You should use this option as a last resort since cashing out can be quite costly in the long term.
Retirement planning can be quite complex, especially if you have to consider a 401(k) rollover. You need correct financial advice to ensure compliance with 401(k) rollover rules and tax laws. Hiring a financial advisor ensures you get the most from your money.
Aveo Capital is your trusted team of experienced financial advisors, bringing you peace of mind. Our team has extensive experience in the wealth management industry, perfect for helping with retirement planning. Contact Us today to learn more.
What is a 401k rollover?
A 401(k) rollover involves moving your funds from one retirement plan to another. You can move your assets from your old 401(k) plan to your new employer's 401(k) or into a traditional IRA.
What happens if I don't rollover my 401k?
Missing the 60-day rollover deadline will expose your 401(k) to financial penalties. However, the account continues earning interest until all of the money is gone.
How long do you have to rollover a 401k after leaving a job?
A period of sixty days is offered under federal law to complete a rollover after leaving a job.
Can I move my 401k to an IRA without penalty?
Yes! There is no financial penalty for a 401(k) to IRA rollover.