If you’ve recently parted way with an employer, it’s easy to forget about your 401k in all the frenzy. But eventually, you’ll get a statement and remember that the account is still there. Often, people elect to leave their account as-is, with the intention of doing something with it later. Eventually, you could end up with several 401k accounts.
When considering your options, you might want to consult a retirement planning expert or certified financial planner. In Atlanta, Resource Planning Group can help you explore your options, as part of your overall financial plan. We specialize in providing a highly personalized level of service that’s designed to help you achieve your goals.
401k Options After Leaving a Job
For whatever reason you leave a job—switching jobs, switching careers, etc.—you have several options for dealing with your 401k account.
You can cash it out, although that’s rarely the best move from a tax liability perspective. You can leave it where it is or roll the balance over to your new employer’s plan. Or you can roll it over into an individual retirement account, or IRA.
Deciding which option makes the most sense can be daunting, especially if you aren’t sure how each of these options will affect you and your financial portfolio. If you leave your 401k where it is or transfer the account balance to your new employer’s plan, neither option is likely to have a significant tax impact. Rolling the balance over to a different type of retirement account, however, could provide significant investment benefits.
Pros & Cons of 401k to IRA Rollovers
Although the benefits and drawbacks of rolling over a 401k are different for everyone, some factors are fairly standard.
Rolling over from a 401k to an IRA should have no tax consequences. If you choose a Roth IRA, however, you will have tax consequences, but they may be offset by long-term investment advantages. Make sure you learn more about the differences (and pros and cons) of both before making any decisions.
Whereas 401k accounts are employer-specific, IRAs are not linked to employment. This means that, with an IRA, you won’t have to worry about transferring accounts every time you change jobs. You also won’t have to worry about plan discontinuation, as you would with an employer-sponsored plan.
With an IRA, you will be able to choose which brokerage firm you want to hold your account. You will have a much wider range of investment choices and you might have reduced fees and costs.
One of the few notable drawbacks of an IRA as compared to a 401k is that you cannot borrow against an IRA.
Should You Roll Your 401k Over to an IRA?
The only way to determine the right answer to this question is to talk to a certified financial planner. In Georgia, Resource Planning Group is dedicated to being your partner in the protection, growth and management of your hard-earned assets.
It’s never too early to start on your retirement planning. Contact us today to learn more about how we can assist you, or to discuss a 401k to IRA rollover strategy.
DISCLAIMER: It is important to note that this information is not meant to provide investment, tax, legal or accounting advice. This material is for informational purposes only, and is not intended to provide, and should not be relied on for, investment, tax, legal or accounting advice. You should always consult your own financial planning, tax, legal and accounting advisors before engaging in any transaction.
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