If you have a 401(k) from your employer and are getting close to retirement or thinking about changing jobs, you need to consider what to do with your plan. One option is to do a 401(k) rollover with the money.

Understanding What a 401K Rollover Is All About

Put simply, a 401(k) rollover is when you take money from your 401(k) and move it into another retirement account with tax advantages. Generally, you have 60 days from the date that you receive the assets or the cash in the plan to put them into another retirement plan. 

You have four different choices of where you can move the assets in your 401(k). You can put them into an individual retirement account or IRA. 

If you are moving to a new job, you can take the assets and move them into your new employer’s 401(k) plan. You also have the option to keep the assets in your old 401(k) with your previous employer. 

One final option is to cash out the value of your 401(k). You need to be mindful of the fact that there may be penalties and taxes to pay if you take this route. 

The Steps to Take for Each 401K Rollover Option

One of the best things about rolling over your 401(k) into an IRA is that it offers plenty of investment choices and can also offer lower fees. If you rollover the assets of a 401(k) into a Roth IRA, you will owe taxes on the amount rolled over. If you roll the same assets into a traditional IRA, taxes owed will get deferred. 

If you choose to take your 401(k) assets and move them to your new employer’s 401(k), you will need to contact the plan administrator at your old job. It is important to tell them that you would like to do a direct rollover. When you do this, your old plan will write a check to your new plan directly and not you personally.

If you like your current plan, you can keep the assets there but bear in mind there may be limitations like you will not be able to make any further contributions, and your fees may be higher. The last option is to take the cash, but this is generally not a good choice because of the fees you will pay. 

Because a 401(k) plan offers so many financial benefits to employees, it is important to ensure these benefits stay in place during retirement or a job change. Fortunately, there are plenty of great options where you can move this money and keep it growing for your future needs.