401k rollover to Roth IRADuring a time of transition, as you move from your old job or, as you re-enter the workforce after being unemployed, don’t forget about your 401k account. As you shift between jobs, your 401k rollover to Roth IRA account sits, waiting. There’s no harm in this, short term, but when you are ready, let’s do that 401k rollover!

You have two main options with the 401k rollover to Roth IRA. You can roll it to a new 401k, offered by your new employer. Or you can roll the funds into an IRA — an individual retirement account. These come in two flavors: pre-tax (the traditional IRA) and post-tax (the Roth). Each have their advantages for a rollover. 401k to IRA means that your money moves from one pre-tax fund to another. Nice and easy, plain and simple.

Like a 401k account, the IRA has a contribution limit. Luckily, your initial funding of the account, with the rollover from 401k to IRA, does not count towards your limit. For those of us who have discovered the joys of saving, this is wonderful news. It’s a bonus to your retirement nest egg.

As we said, Roth IRAs grow with already taxed money. This can make them an attractive option for your retirement plan. One of the major sources of unexpected expense for new retirees is taxes. Yes, you are in a lower tax bracket, but the money pulled from your 401k or IRA is taxable. So when you are thinking about a 401k rollover to IRA, it is important to think about your global financial plan. A 401k rollover to Roth IRA is as simple as any other rollover. You set the new account up with the brokerage firm and let the transfer begin.

There are no fees amended to a rollover from 401k to Roth IRA. There are, of course, fees in maintaining the account. When you have a traditional 401k, the fees are a very small part of the overall landscape.

Imagine: you are spreading the fees among hundreds or thousands of coworkers. When you have an individual account, the fees are a part of the package. Shop around to different firms to find a structure that fits your needs and, if possible, plant your money in a few funds and let it grow.

That’s where the fees can really erode the nest egg — transaction fees. So do your best to avoid moving money between funds, chasing a higher yield. As my dad used to say, Slow and steady wins the race.

Related posts:

  1. Making The Most Of Your Rollover 401k
  2. Difference Between A Roth And Traditional IRA
  3. Best Roth IRA Account
  4. What Are The Roth IRA Qualifications?
  5. IRA Retirement Plan: Moving Investment Money From One Plan To Another

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