Why rollover your 401k

Key Points. Most people roll over k savings into an IRA when they change jobs or retire. But, the majority of k plans allow employees to roll over funds while they are still working. A k rollover into an IRA may offer the opportunity for more control, more diversified investments and flexible beneficiary options. This strategy may not work well for everyone. Work with your advisor to weigh the costs and benefits.

When leaving an employer, there are typically four k options: Leave the money in your former employer's plan, if permitted Roll over the assets to the new employer's plan if one exists and rollovers are permitted Roll over to an IRA Cash out the account value But, leaving an employer isn't the only time you can move your k savings. Find an Advisor. Reasons you may want to roll over now Diversification.

Investment options in your k can be limited and are selected by the plan sponsor. Rolling your funds over into an IRA can often broaden your choice of investments. More choices can mean more diversification in your retirement portfolio and the opportunity to invest in a wider range of asset classes including individual stocks and bonds, managed accounts, REITs and annuities.

Beneficiary flexibility. With some IRAs, you may be able to name multiple and contingent beneficiaries or name a trust as the beneficiary. Other IRAs may allow you to impose restrictions on beneficiaries. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy.

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The information on this site does not modify any insurance policy terms in any way. Making the right decision on where to roll over your account can potentially save you tens of thousands of dollars — or cost you just as much if you make the wrong decision. According to the Department of Labor , just a 1 percent increase in fees could reduce your retirement account balance by 28 percent.

A k rollover is when you direct the transfer of the money in your k plan to a new k plan or IRA. Those who need help with investing may be better served with a rollover to their current k plan, while those who want to invest the money themselves and have the skill to do so, may prefer to opt for an IRA.

Bankrate has reviewed the best places to roll over your k , including brokerage options for those who want to do it themselves and robo-advisor options for those who want a professional to design a portfolio for them. Bankrate has comprehensive brokerage reviews that can help you compare key areas at each provider. For example, if the k company is sending a check, your IRA institution may request that the check be written in a certain way and they might require that the check contains your IRA account number on it.

You have several options to actually move the money from the old provider to the new one, but your best option is a direct rollover. In a direct rollover, the funds are sent straight from your k into your new account without you touching the funds.

Otherwise, it will be a taxable event. Again, each institution may have its own process for moving the money. Accessed Nov. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page. These choices will be signaled globally to our partners and will not affect browsing data. We and our partners process data to: Actively scan device characteristics for identification.

I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. Part Of. Know the k Rules.

How k s Work. Roth k s: The Alternative. Other Types of k s. How Much Should You Contribute? Making Money With Your k. Getting Money From Your k. Rolling Over Your k. Retirement Planning K. Table of Contents Expand. More Investment Choices. Better Communication. Lower Fees and Costs. The Roth Option. Cash Incentives. Fewer Rules. Estate Planning Advantages. After the account is established, you can make new contributions. New contribution limits apply based on what you roll your k into.

Miranda Marquit has been covering personal finance, investing and business topics for almost 15 years. Miranda is completing her MBA and lives in Idaho, where she enjoys spending time with her son playing board games, travel and the outdoors. With two decades of business and finance journalism experience, Ben has covered breaking market news, written on equity markets for Investopedia, and edited personal finance content for Bankrate and LendingTree.

Select Region. United States. United Kingdom. Miranda Marquit, Benjamin Curry. Contributor, Editor. Editorial Note: Forbes Advisor may earn a commission on sales made from partner links on this page, but that doesn't affect our editors' opinions or evaluations. What Is a k Rollover? Get Lower Fees If your workplace k plan charges high administrative fees or only provides access to funds with high expense ratios, rolling over your money to another k or an IRA can save you thousands over the life of your account.

Sometimes you have no choice in the matter. Additionally, you may have to pay income taxes on what you withdraw. Was this article helpful? Share your feedback. Send feedback to the editorial team. Rate this Article. Thank You for your feedback! Something went wrong. Please try again later. Recommended Reading. More from.