401(k) Rollovers Explained

On the 51st episode of the Retirement Explained show, I’m discussing how 401(k) rollovers work and how you should approach them when you’re planning for retirement.

If you’re like most people, a lot of your net worth is in your 401(k) so you’ll love this episode because it’s all about how you can get access to the money you’ve been saving all of these years.

Consider your options

You have four options with your 401(k); you can leave it where it is (with your employer/previous employer, you can cash it out (move it to your bank), you can move it into a Traditional IRA with your financial institution of choice, or you can combine it with a new employer’s 401(k).

There are taxable consequences with some of these options…so watch out! Make sure to talk to a qualified legal or tax professional or financial advisor to discuss your options!

Consider the costs

Nothing is free in this world and that’s definitely true with investing. Make sure you know the costs you’re paying with where your 401(k) is now and compare it to the costs of the IRA you’re consider rolling it into, or the new employer’s 401(k)…they’re not all the same!

Be careful to avoid unnecessary taxes

There are some nuances when it comes to rollovers; there’s a 60-day rule that you need to make sure you’re aware of…so make sure you’re not doing something that will create an unplanned taxable event. Taxes can add up quickly and can account for almost half of your portfolio disappearing!

-Brian