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Why To Rollover Your 401K

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Rolling over a 401K is the process of moving your retirement savings from an employer controlled account (401K) into an IRA. This is a move that I recommend to anyone that has switched employers, retired, or has reached age 59 ½ and is still working. You are eligible to roll over a 401K if you no longer work at the firm that provided your 401K, if you have retired from the firm that provided your 401K, or if you have reached the age of 59 ½ at your current employer*. Below are 5 reasons it is smart to rollover your 401K into an IRA.

1. There is no downside

A 401K to IRA transfer is done through a check from the 401K provider directly into your IRA account. Though assets would have to be sold out of the 401K in order to receive a check, there is no tax event since both account types are tax deferred.

2. Greater transparency

Unfortunately, 401K plans have a lot of hidden charges. Investors don't know how much they are actually paying for their 401K, as it simply gets cut out of their overall performance. This is a known problem, and the department of labor has recently come out with a set of fiduciary rules for 401K plan providers in order to make them more transparent. However, it does not look like these rules will be put into place for another two years. With an IRA, the investors can have a clear picture of their investments with complete access to their fee structure.

3. Greater control

A 401K plan is limited to the investment options that are chosen by your employer and their plan provider. Do you really think that a person working at human resources at your firm is an expert at choosing investments? It simply should not be their job. Additionally, the investment options are usually limited to mutual funds only. In an IRA, you have free range to choose any investments that you choose, including individual stocks, ETF's, bonds, and alternative investments, without limits by your plan provider and employer.

4. Personal service

Have you ever tried to ask a question about your 401K and wind up talking to a number of recordings and waiting on hold with your company's benefits department? The answer is likely yes. When rolling over your 401K into an IRA, you can have access to a wealth advisor. When using a wealth advisor, managing your IRA gives you a completely different level of service. You can call your advisors line directly or email them directly. It is very unlikely that a wealth advisor will make any of their clients wait very long on anything. Their business relies on customer satisfaction.

5. Professional management

When money is rolled over into an IRA, you have the option of professional management, also known as using a Wealth Advisor. There are extraordinary differences between choosing from a list of mutual funds, and using professional management. A wealth advisor will help you choose your investments by reviewing all of your assets, liabilities, and taking your goals into consideration. Try using a wealth advisor that does a complete financial plan, so that your IRA will fit into the rest of your investments, and help you achieve your financial goals.
Many individuals are attached to their 401K plan of a previous or current employer when they don't have to be. Rolling over into an IRA is an easy way to give yourself greater transparency, professional advice, and the prospect of higher returns for an easier retirement.

*This is called an in-service roll over, and is only allowed in certain cases depending on the company you work for.

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