If someone has a 401k an no longer works for the employer or plans on leaving soon, they may wonder if it is best to do a 401k rollover or not. Below, are some reason someone may consider rolling a 401k to an IRA.
1. Limited investment options.
Most 401k plans only offer a few investment options. An rollover IRA on the other hand opens up the world of investment options.
2. A 401k plan can not be stretched?
If someone inherits a 401k they would have to pay all the taxes lump sum. However with an inherited IRA rollover someone can continue to defer taxes on a majority of the account. They are only required to take a minimum distribution.
3. With most 401k plans you can not convert to a Roth IRA
With the Roth IRA the money grows tax-free. This can be a huge advantage if future tax rates go up.
4. 401k plan fees are hard to understand.
With a 401k the plan document is the rule book. With an rollover IRA you manage not only the investment options but also the fees you pay. An IRA owner gets to write their own rule book.
These are just few of the reasons to do a 401k rollover. To know more options and how they may apply to a personal situation work with a financial advisor that specializes in 401k rollovers and IRA accounts.