Why roll over 401k

Table of Contents Expand. More Investment Choices. Better Communication. Lower Fees and Costs. The Roth Option. Cash Incentives. Fewer Rules. Estate Planning Advantages. The Bottom Line. Key Takeaways You don't have to keep your employer-sponsored k as is if you leave your job. You can choose to roll over your plan into an IRA for more investment choices, better communication, lower fees, and the potential to open a Roth account.

Other benefits include cash incentives from brokers to open an IRA, fewer rules, and estate planning advantages. Make sure you weigh the features of both the old employer and the new k plan and how they compare to those offered in an IRA. Article Sources. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate.

You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation.

This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Related Articles. Partner Links. Unemployment Compensation Amendments of The Unemployment Compensation Amendments of allow a terminated employee to roll over employer-sponsored retirement savings to another account. Qualified Distribution A qualified distribution is a withdrawal that is made from an eligible retirement account and is tax- and penalty-free. What is a k Plan?

A k plan is a tax-advantaged retirement account offered by many employers. There are two basic types—traditional and Roth. Retirement tip of the week: Wondering if you should roll over an old k plan or merge a few different retirement accounts?

Rollovers are neither right nor wrong by themselves. The decision to roll assets over should be made on a case-by-case basis. They might also be ready to retire, and want to use the money soon. See: This simple strategy can help you make some important decisions about retirement. If a rollover is the preferred choice, the first step is in finding an eligible and appropriate account for your retirement savings.

For example, a traditional k can be moved to a traditional individual retirement account , which is also funded with pretax dollars. Last name can not exceed 60 characters. Enter a valid email address. Email is required. Email address must be 5 characters at minimum. Email address can not exceed characters. Please enter a valid email address. Thank you for subscribing.

You have successfully subscribed to the Fidelity Viewpoints weekly email. You should begin receiving the email in 7—10 business days. We were unable to process your request. Please Click Here to go to Viewpoints signup page. This information is intended to be educational and is not tailored to the investment needs of any specific investor.

Information herein may refer to or be based on certain rules in effect prior to this legislation and current rules may differ. As always, before making any decisions about your retirement planning or withdrawals, you should consult with your personal tax advisor.

Please speak with your tax advisor regarding the impact of this change on future RMDs. Fidelity does not provide legal or tax advice. The information herein is general and educational in nature and should not be considered legal or tax advice.

Tax laws and regulations are complex and subject to change, which can materially impact investment results. Fidelity cannot guarantee that the information herein is accurate, complete, or timely. Fidelity makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information.

Consult an attorney or tax professional regarding your specific situation. The assets in your IRA are also not subject to blackout periods. With a k plan, the qualified plan trustee owns the assets and assets may be subject to blackout periods in which account access is limited. Distribution options. With k plans and traditional IRAs, the owner will have to take required minimum distributions by April 1 of the year after they turn age Reasons you may want to wait to roll over your k Temporary ban on contributions.

Some plan sponsors impose a temporary ban on further k contributions for employees who withdraw funds before leaving the company. You'll want to determine if the gap in contributions will significantly impact your retirement savings. Early retirement. Most k s allow penalty-free withdrawals after age 55 for early retirees. Increased fees. IRA investors may pay more fees than they would in employer-sponsored plans. One reason: The range of more sophisticated investment options you may choose can be more expensive than k investments.

Your advisor can help identify what extra cost a rollover may incur and if the benefits of the rollover justify those additional costs. Can take loans out. Your k may permit you to take out a loan from the account, but this is typically only for active employees.