When you are close to the retirement age, you have plenty of options with your 401k plan account. You may choose to cash it out or roll it over into your IRA.
Cashing it out might not be the correct option every time, as the taxes and other penalties involved can become a burden. But, if you want greater flexibility and control over your retirement plan, a 401k rollover to your IRA may be the best choice.
You may consult top financial advisers to know about the rules governing this rollover option and the benefits you may enjoy. Here’s when they suggest you opt for a rollover from your 401k plan to your IRA.
You Have Overlapping 401k Accounts
You may have switched jobs frequently, leaving your multiple 401k plans behind with your previous employers. It could lead to mismanagement of overlapping funds, not suitable for your retirement age and risk tolerance levels.
Considering these aspects, leading advisers recommend you roll over your 401k plan to your IRA at the time of your retirement. Once you consolidate your old 401k plan accounts, this IRA rollover will help boost your chances of saving more money, as you won’t have to worry about maintaining several accounts.
Your 401k Plan Involves High-cost Investments
Some large 401k plans falter due to underperforming funds and high costs. And schemes offered by midsize firms come loaded with insurance products charging shockingly high fees.
So, when you opt for the 401k rollover to IRA, your money gets invested in low-cost investment portfolios, such as ETFs.
Top experts suggest looking at the hidden fees attached to your 401k plan, such as administrative fees. You may also check your plan’s investment costs, expressed as an expense ratio. It will help you compare how much you save when rolling over to your IRA.
You Want More Bond Funds
Though 401k plans have a solid array of stock funds, they are usually much weaker if you consider fixed-income options. Your choices may be limited to a bond index fund or money market fund. Moreover, some plans may require you to accumulate funds aggressively.
On the other hand, you will want a reliable fixed source of income once you retire and would prefer to shift to a less-aggressive mix of investments.
In such scenarios, experienced professionals can help you rollover 401k to IRA. It will provide you with a broader assortment of fixed-income choices, such as international bond funds.
You Want Flexibility in Withdrawals
Only some large 401k plans allow retired participants to withdraw money in regularly scheduled installments and take withdrawals whenever they want.
But when you retire, you may have plans to take out the entire amount to pursue other investment options. In such a situation, experts recommend rolling your money from your 401k plan into your IRA. It will enable you to handle your withdrawals and taxes on those withdrawals better.
Per 401k rollover to IRA rules, you will have the flexibility to withdraw the entire amount from one fund and leave the rest to grow. However, you need expert counsel to make the right decision.
When even planning a traditional 401k rollover to Roth IRA, reach out to an experienced consultant. You will gain more knowledge about the rollover and the limits, thus ensuring you make an informed decision.