Is A 401k Rollover The Right Choice, Right Now?

If you’re employed and your company offers a 401k plan where they match the contributions, you would be crazy not to participate. A 401k plan helps you secure your retirement years so that you can enjoy the fruits of your labor. You didn’t work hard for nothing, right? Not only is investing a smart choice but another great benefit of the 401k is that you can roll it over to a new employer if you ever change companies. This allows you the opportunity to keep your money moving as you move. There are however some situations where a 401k rollover to a new employer may not be the right option for you to take at this point. Maybe your new employers investments aren’t that appealing or they may have limited options to choose from. In a situation like this, you may consider these options:

o You can leave your current investments right where they are, so long as your previous employer allows it.

o You could cash out your 401k.

o You can enroll in an outside account such as an IRA.

The choice you make out of these 3 options is going to depend greatly on your current situation and financial needs, for example:

Not Sure What To Do

If you are not sure what to do or need some time to research your new employers 401k options, keep the money where it is if it’s allowed. You may have to pay some maintenance fee’s because you’re no longer employed but if your 401k is doing well you may be better off leaving it there for while or at least until you can get financial help from a professional.

Your Needs

Sure, you are saving for retirement but as we all know emergencies can show up on our doorstep uninvited and unexpected. This may be a situation where you would need to cash out your 401k. You will pay some big fines and penalties but sometimes you’ve run out of financial resources. Another option, a smart option, would be to roll it into an IRA account and withdraw money as you need it. The penalties you pay will be a lot less.

Your Choice of Investments

If the investment options that are presented to you from your new employer aren’t great, consider an IRA. Your portfolio should include stocks and bonds and mutual funds and so if you’re not satisfied with the 401k offerings an IRA may be the right place for you to rollover your funds.

Think carefully about your situation and remember that unless you absolutely have to, don’t cash out your 401k. Rolling over is a much better option to ensure that your money continues to be invested.

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