I?ve switched jobs several times in my career and each time I had to decide what I wanted to do with my 401(k). Each time, I rolled it over into a Rollover IRA. It wasn?t that my employer?s 401(k) was bad (it was average in both cases) it was that there are so many benefits to rolling over an IRA to an actual brokerage firm.
Consolidate all your old 401(k)s into one IRA.
One of the best ways to save for retirement is to use a tax-advantaged plan offered by your employer, such as a 401(k) and 403(b). You can grow your wealth through the help of investing, and more of your money can grow , thanks to the tax advantages. The tricky part is always whether you have enough options. Not all defined contribution plans, as these are known, are created equal and sometimes the plan options or the plan fees make it a dicey proposition at best.
When you leave a company, you have the option of rolling over your plan into an IRA, keeping it with your employer, or rolling it over to your new employer?s plan. I?ve always opted to rollover my plans into a rollover IRA and today I?ll explain the reasons why.
More Investing Options
One of the main benefits of an IRA is that there are often more investing options. If you contribute to your employer?s retirement plan, you might end up with only a few options chosen by the plan administrator. You might have to be heavily invested in company stock or you might have a limited number of high cost mutual funds to choose from. The point isn?t to lambaste the administrator, they?re simply trying to pick the options they believe should be made available to all employees.
Instead of relying on these investment options, some of which you might not be comfortable with, you can roll your plan over to an IRA and have nearly the entire universe of options available to you. IRAs are individual accounts so you have access to a wider variety of investing options. You might be able to add cash, bonds, and stocks, as well as other asset classes, to your IRA.
Fees
The fees with an IRA can often be lower than what is charged by your plan administrator. I know that when I rolled over my 401(k), the brokerage charged no annual administrative fee and that saved me $50 a year. The only fees I paid were the expenses of the mutual funds I was invested in, which my 401(k) was also charging me. Lastly, the expense fees I was paying now were much lower because they were index funds rather than actively managed funds. You can?t control how your investments perform but you can control how much you pay in fees, which has a direct impact on your returns.
What about Taxes?
If you roll over to an IRA, you don?t normally need to pay taxes. As long as you are careful to designate your withdrawal as a rollover, and as long as the money is invested in a Traditional IRA, you don?t have to worry about taxes. The only exception is if you are rolling your money over from a tax-deferred account into a Roth IRA, which is known as a conversion.
With a tax-deferred account, such as a traditional 401(k) or 403(b), you receive a tax deduction and you are expected to pay taxes later, when you withdraw from your account. If you roll over the money from a traditional plan to a Roth IRA, you will have to pay income taxes on the money (although you will escape the 10% penalty for an early withdrawal if you are under 59 ? years of age).
Carefully consider your financial situation. It may be that it makes sense for you to roll your? 401(k) or 403(b) into an IRA to improve your investment options, or to better handle your tax planning for the long run.
record store day 2012 detroit red wings jose canseco zimmerman derek fisher lyrid meteor shower hippocrates
কোন মন্তব্য নেই:
একটি মন্তব্য পোস্ট করুন