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April 15, 2020
If you are retiring or leaving a job, you need to decide what to do with your 401(k). In most cases you will want to rollover (transfer) your 401(k) into an IRA or Roth IRA.
Some companies actually require that you do a rollover at retirement and most financial experts suggest that rolling over is a good idea in order to gain maximum control over your retirement funds.
While it is usually a good idea to rollover, sometimes it makes sense to leave your money in the 401(k).
Before initiating a rollover, you will want to think about how you want to invest your 401(k) savings. Do you want to invest in stocks, funds, an annuity or some other investment option?
If you have company stock in a 401(k), you will want to learn about Net Unrealized Appreciation (NUA) and how to minimize taxes when you rollover these funds to an IRA.
Learn more here.
Once you have answered this question, you can figure out which type of financial institution will be best for your needs. You can choose an appropriate brokerage or bank and open your IRA account.
While it is possible to withdraw the funds from your 401(k) and then open up an IRA, it is safer to do a direct rollover — meaning you open an IRA first and then transfer your 401(k) money directly into the new account.
Once you have an IRA account, you can contact your previous employer and ask them to begin the rollover process.
While you can not rollover funds directly into a Roth IRA, you can rollover into a traditional IRA and then convert that money into a Roth IRA.
Roth IRAs have some very big advantages over traditional IRAs related to taxes and withdrawals.
Learn more about Roth Conversions or try it out in your plan using the NewRetirement Retirement Planner.
Once you have completed your rollover (and Roth conversion, if applicable), you want to make sure that you invest it appropriately as soon as it makes sense.
Rollovers are a big financial move and a great opportunity to get professional advice on your investment strategies.
It can be useful and reassuring to model different financial moves in the NewRetirement Planner or consult with a Certified Financial Advisor.
Did you know that NewRetirement offers flat fee advisory services? You can collaborate with a Certified Financial Planner who has taken a fiduciary oath and specializes in retirement. Your advisor will:
Click here if you would like to learn more about NewRetirement Advisors.
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