A rollover is the transfer of the holdings of one retirement plan to another without tax consequences. It is not necessary to rollover your 401(k) when you terminate with an employer but many do choose to move the funds to their new employers retirement plan or to an IRA. Either option is viable but there are several factors to consider before taking action.
Your first step is to review your current 401(k). Look at how much is in the account now, how much it has grown and what were the employee/employer contributions. It is important to know what assets are in your account as company stock receives special tax treatment when held in an employer-sponsored 401(k) and you may lose that if transferred to another company or to an IRA.
Next you need to determine where you want to move the funds looking closely at fees and the investment options available within the accounts. Large companies often negotiate institutionally priced investments with lower costs than you can get on your own retail IRA. On the other hand, IRAs usually have more investment choices than a 401(k) offering greater diversification.
Now that you have considered what you have and where you want to move it, contact your current plan administrator to initiate the rollover. Do not hesitate to ask questions of the plan administrator – they have done this before and understand how important it is to you for the request to be submitted correctly.
Still have questions? Feel free to contact Hillspring Financial, Inc. for a review of your current plan and an analysis of your options.