While rolling over to IRA seems to be the better option, there are certain things that you should consider before you make the move.
Retirement money means the world to a lot of people. This is why it has to be handled well. Rolling over your 401k to IRA is something that you should consider carefully, especially if you want to have the best possible outcome of it.
For starters, you have to consider the fees involved. If you’re looking at a rollover, be sure that the IRA would charge lower fees than the 401k plan of your new company. The IRA proposes a good deal if you get your IRA from a small to a medium scale business entity.
If in case you intend to invest your money, you might as well check out the rollover options you have on the 401k and compare it to that of the IRA. The IRA is most likely the winner here, especially if you want to invest on bonds, stocks, and mutual funds with your money.
There are some penalties involved with a 401k plan too. Be sure that you check into this matter before you do anything. Transferring a 401k to a new job or an IRA will incur charges that need to be considered well. If the charges and the penalties are worth it, then proceed with the rollover.
Consider the current standing of your company too. If you’re switching jobs, try to consider the 401k options and benefits of your previous employer with your new one and then to IRA. Some companies offer a comprehensive 401k plan to their employees. Make sure that you get the best possible deal at all times.
Try not to withdraw, make a loan out of, or even touch your retirement money so it can grow. If you don’t have a choice when it comes to this matter, may be because you’ve got more dues to pay right now than in the future, you might as well stick to a 401k so you won’t have to pay for the penalties and taxes when withdrawing.
Your retirement age is also something that you should consider. At what age would like to withdraw your money? With IRA, you have to be 60 years old to waive the fees and penalties. With a 401k, you can cash in as early as 55 years old.
Lastly, if you’re thinking of transferring most or part of the money to your heirs, the IRA offers a better deal with Stretch IRA account where you enjoy tax-deferred savings over an extended period of time. Whilst most 401k only allows for a spousal rollover, Stretch IRA is a great way to accumulate financial freedom for your heirs.
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2010 Contribution Limits
The 401(k) contribution limit for is $16,500 for those under 50 years old. For anyone between the ages of 50 and 59 ½ years old you also have the option of contributing an additional $5,500 as a catch-up contribution.The IRA contribution limit for is $5,000 for those under 50 years old, with a $1,000 catch-up contribution option for those between 50 and 59 ½ years old.