401k Rollover

Given the current economic climate more and more people find themselves having to worry about rolling over a 401k.  If you have a 401k account from a former employer it may be necessary or at least beneficial to roll that money into a different account.  There are several options for this.  Read below for more information.

Often it is possible to roll over your old employers 401k plan into your new employers plan.  The nice part about this is that all of your 401k savings are located in one account.  This greatly simplifies your retirement savings into one centrally located place.  If your new employer has a good plan this can be an excellent way to go.  However, beyond simplifying things this is not that great of an option.  Your options for what you can put your money into are limited to whatever is offered within that given plan. 

Similar to rolling over to a traditional IRA, rolling over to a Roth IRA allows for great flexibility in which company you choose as well as which vehicles you choose to put your money into.  However, due to the Roth IRA being post tax money there are usually some financial consequences for rolling it over in this fashion.  Normally it involves paying the tax you would have paid on that money out of your pocket which allows for the money in the account to be post tax now.  However, keep in mind that this money is then exempt from taxes forever so long as you don't take out any of the earnings until you are at least 59.5 years old.

One option that is simple and easy as well as allows for great flexibility is to roll your old employer 401k plan into a traditional IRA.  A traditional IRA is still a pre-tax plan very similar to a 401k.  For this reason rolling the money into the plan causes no tax consequences and all the rules apply for an IRA.  The beauty here is that you can choose any of a great number of companies that offer IRAs which will allow you to buy any number of money vehicles to put your assets in such as stock, bonds, exchange traded mutual funds (lower fees than traditional mutual funds), options, money markets, the list goes on and on.