If you're in the process of evaluating your retirement savings strategy, you should at least think about rolling some or all of your funds into a Roth IRA through a 401k IRA rollover. Although these kind of savings accounts aren't right for everyone, they offer a number of different benefits that make them worthy of something to consider. Here's why you should perform a 401k IRA roll-over:
• Contributions to Roth retirement accounts are made on a post-tax basis, so just about any Roth IRA withdrawals you make from the Roth IRA come out tax-free (you will need to pay income tax on funds converted form a traditional 401k into a Roth IRA).
• Roth accounts are not associated with IRA minimum distribution requirements, and that means you can keep you retirement financial savings intact for as long as possible.
• Roth assets can be left to beneficiaries as part of your estate much more very easily than retirement funds kept in traditional 401k accounts or IRAs (easily meaning that the beneficiaries won't need to pay tax on withdrawals).
Should you currently hold funds inside a traditional 401k , you can move this money into a Roth IRA through a procedure known as a 401k IRA rollover. This method isn't complicated, but it is important that you observe the details of the transaction to make sure that everything runs smoothly.
The initial step of your 401k IRA rollover is always to select the account provider that can hold your new Roth IRA along with receiving the funds from your 401k . There are a number of different retirement savings account providers available today, therefore it's important to evaluate them very carefully to find the best one for your needs.
Nonetheless, one quick note very first. When you begin the paperwork for your 401k IRA rollover, you'll notice that there is an option to move your retirement savings into a brand new employer-sponsored Roth account. In almost all cases, it's far better to avoid this option and start using a private Roth account provider. Employer-sponsored retirement plans are infamously limited in terms of their 401k investment options. Working with a private 401k IRA rollover account provider will provide you with access to many more investment options, some of which will likely carry higher rates of returns as compared to anything in your employer-sponsored plan's portfolio. As an example, in your own self-directed IRA, you will be able to purchase any stock or bond you desire. Not so with employer accounts which offer a limited menu of funds.
With regards to choosing a private 401k IRA rollover account provider, there are a number of things you should consider. But first you need to find a provider to consider! Luckily, you'll find that many different institutions offer you 401k IRA rollover accounts. By example, your bank, local lending institution, on-line banks, private brokerage companies and your insurance companies are a few places to start.
When you have a few 401k IRA rollover suppliers identified, you can start to limit your list. First, consider the number of different investment options you'll get access to. Private brokerage houses usually have the advantage here, although other financial institutions have dramatically increased their own offerings recently as well.
You'll want to consider the customer service you receive whenever you interact with each potential company. Remember, these are the people who will probably be assisting you throughout the 401k IRA rollover process and ultimately handling your hard earned retirement savings. As a result, it's important to find an account service provider you trust before beginning your 401k IRA rollover.
Lose a Fortune on Your 401k Rollover
If you do not do any of these correctly:
- Opt for a distribution rather than direct transfer
- Rollover company stock to an IRA
- Choose to rollover to a Roth IRA
- Rollover to your new employer’s 401k
- Rollover post-tax contributions