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Advantages of a Rollover 401k

Posted on | March 4, 2011 | 3 Comments

There are many reasons why a person leaves his or her job. It could be for a change of career, or to go for better employment options with a bigger salary and benefits. But whatever the reason, leaving a job will surely bring about a lot of change and difficulties. If you have stayed in your previous job for a long time, chances are you have invested in your employer’s retirement plan, usually a 401k. Now that you have left your job, you have free reign as to how you want your invested 401k funds to be utilized. A popular choice is a 401k rollover to IRA. This option has many advantages, some of which are listed below:

No Penalties

What most people usually do is they opt to withdraw all their funds from their old 401k account. A big problem is that in doing so, you will be given a 10% tax penalty for early withdrawal in addition to federal and state taxes. This could take a big chunk of your supposedly retirement fund. Choosing to directly rollover your money to an IRA account will not cost you any penalties at all.

Lower Costs

If you are diligent in searching for a suitable IRA plan to transfer your 401k funds into, chances are you can come across a plan with lower administration fees and maintenance costs than your 401k plan. This could mean big savings for you. You can channel your money to improve your investment rather than use them to pay fees.


With your 401k, your investment choices are most likely limited only to mutual funds. But with an IRA, you have a lot more options. This includes not only mutual funds but also stock, bonds and the like. The more options you have, the more ways you have to improve your investment.

These are just a few advantages if you choose a 401k rollover to IRA. For an in-depth knowledge of the advantages of a rollover, do not hesitate to ask a professional for help.

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