It’s not uncommon for Americans to change jobs numerous times throughout their lives—as often as every five or so years, in fact. For those who have a 401(k) tied to their current position, however, understanding what to do with the account when heading elsewhere can be easier said than done.

Transferring your retirement account is a crucial task and one that you simply cannot afford to overlook. Otherwise, you may end up leaving retirement accounts at old employers and racking-up unnecessary, sometimes hefty fees in the process.

Not sure how to move forward?

You may want to roll your 401(k) into an IRA. First, let’s take a look at the benefits of this type of rollover, all of which can bode well for your financial future.

Extensive Investment Options

An unfortunate reality of the traditional 401(k) is that this type of account doesn’t typically come stacked with unique investment options. It’s one reason why the 401(k) is considered to be such a “safe” retirement account, which may not necessarily resonate with everyone. Rolling over your account into an IRA opens up a wealth of different types of investment opportunities you won’t have with a 401(k), such as individual stocks, ETFs and more. If you’re sick of your retirement package consisting of mutual funds and nothing but, an IRA may be exactly what you’re looking for.

Option for Roth IRA

Those who find themselves within the acceptable income bracket can get a lot of mileage out of opening a Roth IRA. This type of account is funded with after-tax dollars, which means you won’t have to pay taxes on the funds once you reach the proper age for withdrawal. A traditional IRA may be a better fit for some — high earners fall into this category — but having the opportunity to open a Roth IRA is reason enough for most people to consider rolling-over their 401(k).

Retirement Nest Egg

You Can Still Borrow With a Roth IRA

One major benefit that comes along with having a 401(k) is that you can typically borrow from the account under circumstances of duress without having to worry about paying hefty fees as a result. While the same cannot necessarily be said for a traditional IRA, the Roth variety does allow for borrowing. If you thought this was a feature you might lose in a roll-over, you’ll be happy to know that’s not necessarily the case.

Estate Planning Benefits

When it comes to estate planning, the more buttoned-up you can be, the better. There are certainly exceptions to the rule, but most 401(k) plans tend to pay out in a single lump sum to a beneficiary in the case of one’s passing. With an IRA, on the other hand, you’ll have multiple options to choose from that will allow you to customize how your money gets paid out—an advantage that often goes overlooked.

How to Rollover Your 401(k)

So, you’ve decided that the benefits of rolling-over your 401(k) are too much to pass up — what’s next?

First, you’re going to want to choose between the following four options. You can:

  • Roll Your 401(k) into a Traditional IRA
  • Roll Your 401(k) into a Roth IRA
  • Roll Your 401(k) into a Gold IRA
  • Roll Your 401(k) into another 401(k) with a New Employer

The last option may be a smart idea in the case that you’re looking to keep all of your retirement funds in a single account, especially if the new plan offers reduced-cost investment options to take advantage of. In this case, be sure to talk to the plan administrator at your new place of work.

Otherwise, determine whether you’re interested in moving your money into a traditional IRA, the Roth variety or the lesser known, Gold IRA. Note that rolling your funds into a Roth IRA will require you to pay taxes on the amount you choose to move.

Talk to a trusted financial advisor who can walk you through the various options, and help you determine which one would be best for your unique situation. Once you’ve made the decision, it’s time to open a rollover individual retirement account.

Open Rollover Individual Retirement Account

With an IRA opened, you can rest easy knowing that half the work has already been done. The next step is to ask your former employer or whoever is in charge of your 401(k) for something called a “direct rollover.” Language matters under these circumstances, as specifying a direct rollover will ensure that a check is cut not to you personally, but to the IRA you’ve opened.

You should notice in a few business days that the funds will be available in your new IRA for investing. While having a wide variety of different investment options to choose from is surely a benefit of performing a 401(k) rollover, be sure to take caution in your decisions. Start with investments you truly believe are safe, and determine from there whether or not you’d like to experiment with riskier portfolio options.

So, don’t just assume that rolling a 401(k) into an IRA is a difficult or time-consuming process. In a few easy steps, you can go from having a mundane retirement account to having a wealth of new investment opportunities at your fingertips.

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