When to Roll Over Your 401k

A 401k roll over is something that many people consider at some point in their working life. Choosing the proper time to roll over is essential if you want to maximize your returns and eliminate fees and penalties. Here are a few things to think about if you are considering rolling over your 401k.

Company Strength

The first thing to consider is the strength of the company that you work for. Much of the profitability of your 401k depends on the company that offers it. If your employer will be around for the long-haul, then you are at an advantage. However, if you think that your company will be closed in the near future, it may be to your advantage to transfer your funds. Many times, companies will throw in stock options into a 401k as part of their contributions. If the company stock is worth something, then this is an advantage to you. However, if the company closes, your retirement funds could plummet. If you feel that the company you work for will not be around for very long, you will probably be better off to move your funds into another type of retirement account.

Low Investment Amount

If you invest a very small percentage of your paycheck into your 401k, then you could be at a disadvantage. In some cases, the fees associated with running your 401k outweigh the gains that you are receiving from your account. In this case, it would be to your advantage to transfer your funds to another provider with lower fees.

Finding a broker with low fees will go a long way towards providing you with the best 401k experience. When you are charged high fees for everything you do, it negates any of the gains that you would have earned. If you have a large account and contribute a large percentage of your paycheck, it might not make a difference. However, on a smaller scale, everything is more noticeable.

Changing Jobs

During a career change, many people lose track of their 401k. They forget about it or they let it just sit there. Once you have secured a new job, there is a good chance that your new employer will offer some type of 401k. After you have opened your new 401k, you will want to transfer the money from your old account into the new one. Many people simply cash out their 401ks when they change jobs; however, this is not the best way to handle it. You will lose quite a bit of money in penalties and taxes doing it this way. In fact, you will be charged 10% for an early distribution penalty and then have to pay income taxes at your normal rate on the money. Roll it over into a new account and keep all of your hard earned money.

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