You aren’t predominantly delighted in the returns that you are receiving from your 401k, thus you look at the rollover option. The great news is that you can perform a 401k rollover to IRA, which is not only beneficial if you are leaving your present job, but is also advantageous in several ways if you select the right retirement plan to convert to.
From 401k to IRA
There are numerous benefits when you carry out a 401k rollover to an Individual Retirement Account (IRA). One of the most significant advantages of making a rollover to an IRA is that you are granted with more flexibility. With a 401k, you are tied with the company you are offering your services to and so you are restricted when it comes to investing in certain stocks and assets. When you’re an IRA owner, you have the opportunity to self-direct your retirement plan, and as a result you can place your funds in broader investment choices with higher profit potential.
Using the Best IRA Provider
The first step to rolling over your 401k into an IRA is to open your account with a top IRA company.
The best IRA rollover company we’ve found is optionsXpress. They have an all-in-one IRA account with no minimum balances or maintenance fees. With a flat fee of only $9.95 per transaction it’s one of the cheapest brokerages available today if you plan to invest into a retirement account.
- Roll over your 401k from your former employer for FREE
- No IRA minimum balance or maintenance fees
- Rollover your 401k with optionsXpress today
Self-directed IRAs vs Self-directed 401k Plans
It’s essential to convert to a self-directed IRA rather than going for a traditional IRA because some investment options are not applicable with the latter. In addition, it is essential for you to distinguish between self-directed IRAs and self-directed 401k retirement options.
There are some people that mistakenly perceive that a 401k rollover to IRA is not important if you can just convert your account to a self-directed 401k. The 401k that is self-directed may appear and sound the same but it has more limitations than the IRA. For instance, some employers implement limits on part of the account that can be self-directed. And despite what kind of plan you have, 401k plans remain tied to the company you are employed in, thus if your employer wants to switch plans, or carry out unfavorable changes, you have no say on the issue.
Aside from the fact that you will not encounter the above problems when you switch to self-directed IRAs, you are given the opportunity to have an IRA investment in stock. You will manage every segment of your account and select an account professional or counselor who can guide you in meeting all of your financial goals. Don’t think that doing the rollover will add up to your current workload, all you have to carry out is to convey your goals and plans to your counselor and then he or she will act on your behalf.
Another great aspect of making a rollover to an IRA from your 401k is the option to switch to a Roth IRA. Roth retirement plans are known for being beneficial since you make after-tax contributions, which will never be taxed in the future. These are specifically a great choice if you anticipate higher tax bracket after your retirement. While it may sound tempting to be able to put tax-deferred funds on your account like in a traditional IRA, remember that it will still get taxed later on and more likely at a higher rate. To have a profitable Roth IRA, it is necessary that you learn about the Roth IRA rates.