Rolling Your 401k to an IRA: What You Need to Know

One of the most important decisions you can make when it comes to long-term savings is what to do with your 401k when you leave your job. While you have several options, rolling your 401k to an IRA is often a smart move. Here’s what you need to know.

Why Roll Over Your 401k?

If you’re leaving your job, you have several options when it comes to your 401k. You can leave it with your old employer, move it to your new employer’s plan, cash it out (which I don’t recommend, as it will incur taxes and penalties), or roll it over to an IRA. There are several reasons why rolling your 401k to an IRA is often the best choice:

  1. More Investment Options: 401k plans often have a limited selection of investment options. With an IRA, you’ll have access to a wider range of investments, including individual stocks, bonds, and mutual funds.
  2. Lower Fees: Many 401k plans charge high fees, which can eat into your returns over time. With an IRA, you can choose a low-cost provider and save on fees.
  3. More Control: When you roll your 401k to an IRA, you’ll have more control over your investments. You can choose your own investments and adjust your portfolio as needed.
  4. Simplification: If you’ve had multiple jobs over the years, you may have several 401k plans floating around. Rolling them over to a single IRA can simplify your financial life and make it easier to manage your investments.

How to Roll Over Your 401k to an IRA

Rolling your 401k to an IRA is a fairly straightforward process. Here are the steps to follow:

  1. Choose an IRA provider: Look for a provider with low fees and a good selection of investment options.
  2. Open an IRA account: Follow the provider’s instructions to open an account.
  3. Request a rollover: Contact your 401k plan administrator and request a rollover. They’ll provide you with the necessary paperwork.
  4. Complete the paperwork: Fill out the paperwork and provide your new IRA account information.
  5. Wait for the transfer: Your old 401k plan will transfer your funds directly to your new IRA account.
  6. Invest your money: Once the transfer is complete, you can choose your investments and begin managing your portfolio.

Important Considerations

Before you roll over your 401k to an IRA, there are a few important things to keep in mind:

  1. Taxes: If you have a traditional 401k, rolling it over to a traditional IRA won’t incur taxes. However, if you have a Roth 401k and roll it over to a traditional IRA, you’ll owe taxes on the amount rolled over.
  2. Fees: Make sure you understand the fees associated with your new IRA provider. Look for a provider with low fees to minimize costs.
  3. Investment options: Make sure the new provider offers the investment options you want.
  4. Timing: Make sure you initiate the rollover within 60 days of leaving your job to avoid taxes and penalties.

Rolling your 401k to an IRA can be a smart move for many reasons. It can give you more investment options, lower fees, more control, and simplify your financial life. Just make sure you choose a low-cost provider, understand the tax implications, and follow the proper steps to initiate the rollover. With a little planning and effort, you can set yourself up for a more secure financial future.


  • Teddy Beasley

    Beasley, a proud trans man from New Orleans, Louisiana, brings a fresh perspective to the table. As a self-taught day trader and personal finance guru, Teddy has combined his love for the arts and finance in a unique and captivating way. After a dance career ended prematurely, he found passion in finance, turning a small insurance payout into a sizable portfolio. Teddy shares insights about personal finance, investing, and wealth management, incorporating his life as a dancer to engage a wide audience. As a strong advocate for the LGBTQ+ community, he focuses on empowering trans individuals through financial literacy.

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