3 Reasons To Consider Rolling Over Your 401k
Have you recently started a new job?
If so, one of the last things on your mind might be the money that remains in your old employer’s 401k plan. However, rolling your 401k into an IRA could offer significant benefits. You can move the cash into an account where you – not your old employer – makes the decisions and this process, called a 401k rollover, can have an impact on the amount of money you will benefit from at your retirement.
Here are three reasons to consider rolling over your 401k plan.
1. Better investment choices
When you start an IRA you can choose your own investments. Rather than the funds and managers being selected by your old employer an IRA gives you access to thousands of different types of investments. This means that you can develop a diversified portfolio and follow proven investment strategies such as diversification and asset allocation.
2. You will generally pay lower fees
A 2009 study by Deloitte and the Investment Company Institute found the median admin fee for a 401k plan to be 0.72% of assets annually. These fees represent money that is not being used to fund your retirement.
Most IRA rollover accounts do not have fees associated with them and so this can help your fund grow faster. Experts suggest that between less expensive investment options and lower administrative costs, you may be able to reduce your total investment costs by 1% per year simply by moving your money from a 401k to an IRA.
In addition, because you can make the investment decisions within an IRA, you can take advantage of funds that typically have lower expense ratios than funds available through your 401k plan.
3. It is easier to manage your retirement account
When your retirement cash is in a single IRA it is easier to monitor whether you are on track to make enough money for your retirement. You don’t have to check multiple accounts and it is much more straightforward to calculate your return as well as monitoring the return provided by specific funds or investments.
Hi there. Can you do a 401k rollover more than once?
Brian – thanks for your question.
The answer is yes, you can. If you contribute to several 401k plans in your lifetime, you may find yourself doing a rollover more than once.
Can you rollover only part of a 401 k retirement plan and keep the rest
if so what are the expected penalties and such? The percentage of money you leave out, is it subjectable to 10% intial penalty and then the secondary penalty at tax time Ie 2014. Or is the money subjectable to 10% and another percentage intially, then again as earned income for 2014.