An employer-sponsored 401(k) account can be a cornerstone of your retirement plan, and you may wonder what to do with these funds if you want to change to a new job. Often, you can leave the funds in the account, take a cash withdrawal and a tax penalty, or go through the 401(k) rollover process. This involves transferring the funds into an individual retirement account (IRA), and below are several advantages of it.

Why Should You Consider a 401(k) Rollover?

1. Increase Investment Opportunities

Most 401(k) programs are limited to a few mutual funds, which may not perform as well as other options, depending on the market's current environment. Whether you leave your retirement savings in an existing account or add them to a new 401(k), you may lose out on valuable investment opportunities. However, an IRA has access to a wide range of investment vehicles, including options and real estate.

2. Boost Predictability

A 401(k) plan is tied to your employment, so you may have to go through the entire process again if you change jobs. This can take valuable time and prevent the funds from gaining value. On the other hand, after you roll the balance over into an IRA, the funds belong to you. No matter what happens in the future, you won’t have to worry about transferring the funds or losing part of your retirement due to employment choices.

3. Save Money

The mutual funds offered by 401(k) plans are often more expensive than similar products. Additionally, you face administrative charges every year, which are deducted from the account. An IRA has more investment opportunities, allowing you to find cost-effective trades. By choosing the right vehicle, you could add hundreds of dollars per year to your retirement savings.

4. Convert to a Roth IRA

With a Roth IRA, you contribute to the account after your income is taxed. While this means you initially deposit less, when you withdraw the money, it is not subject to taxes. This can result in a significant difference in your funds and tax bracket, especially if you are likely to be at a higher standing when you retire.

5. Receive Cash Incentives

Financial institutions compete to manage your savings, so they often offer significant incentives if you want to pursue a 401(k) rollover. For example, some banks may add a few thousand dollars to your savings for converting your funds to an IRA. While this may not seem like much now, compound interest could double the value of the incentives over several years.

If you need help planning for the future and learning about a 401(k) rollover, contact Senior Elite Services LLC in Fairview, TN. These financial experts can help you with everything from signing up for Medicare Prescription Part D to applying for social security and getting long-term care insurance. Visit the website for more on their financial services, and call (615) 266-2603 to make an appointment today.