Grow Your Nest Egg With 401k Rollover

Have a a 401k plan at work? if you leave your job for any reason, you have options to leave it where it is, or moving your money into a 401k rollover account. For many reasons, the 401k roll over could be your best bet.

With so many people saving more today, and also an increased possibility of being laid off and changing jobs, using the 401k rollover option is a way to maintain some control over your retirement security. Unfortunately, the roll over is not very well explained or understood by most investors.

The 401k roll over account is just a new account into which you move the 401k funds you accumulated with your previous employer. Then you can take over management of the funds instead of your previous employer’s management company. All you need to do is open a new account with a broker you choose. They give you all the proper paperwork to transfer everything from your previous job. If you don’t take any withdrawals from your account, there are no penalties or taxes.

There are four main options for yoru 401k funds when you leave your employer:

1) Take a cash withdrawal, on which you will pay up to 40% in taxes and penalties; 2) Keep your funds with your previous employer’s plan; 3) Move your old 401k balance into your your new employer’s plan, or 4) Move funds into a new 401k Rollover IRA account at a broker of your choice.

Option #1 is the least desirable, since you will pay about 40% of your account in fees and penalties. Options #2 and #3 may be best for anyone who does not want to manage their own investments. Option #4 however gives you the best opportunity to continue to grow your account for retirement.

By keeping your funds in an employer’s plan, the investment options you have are limited to usually a few large funds, some international funds for diversification, and possibly a money market option. There is no opportunity to take advantage of timely market changes and shift your funds into vehicles with a higher potential for returns.

Within a self directed IRA however, you are able to actively manage your account. You have complete access to the thousands of mutual funds on the market, as well as ETFs, stocks, bonds and any of the investment vehicles available within a regular brokerage account.

Self directed accounts give you a greater opportunity to profit. For example, on an account with an employer plan returning an average of 8%, if you can increase your returns in a self directed account to 12%, you could retire with nearly double the account balance as if you had remained within the employer’s plan.

These multiple advantages of moving retirement account into a 401k rollover self directed IRA means you can grow your balances and make a big impact on your future financial stability.

When you switch jobs or retire, a Rollover IRA gives you a choice of investments going forward that are not available in an employer-sponsored plan. A self-directed IRA allows you to structure your retirement portfolio to increase the growth of your retirement savings.

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