Change of Plans: 401k Rollover
With the stress of work and all the responsibilities, many people look forward to retirement. But before imagining what you can do, plan for it. One of the best ways to do save up for those wonderful days is the 401k investment plan.
In the United States, the 401k investment plan is a common scheme, and largely the big part of it concerns the 401k rollover. An employee can take part of their salary straight into a pension fund that they can withdraw upon retirement using this scheme. What’s more is that the employer can also make contributions to this plan, tax-free. What happens if you change jobs? That’s when the gold 401k rollover comes to play.
An IRA, or Individual Retirement Account, is where you can transfer the contributions from your retirement account. This is the rollover. Your old employer can wire money straight to your personal account. Moreover, this process frees you from penalties and taxes. You can also move your exiting 401k plan to your new employer, that is, if the company accepts the gold 401k rollover. Review the investment options of your new company to know if you can do this.
However, if you own stocks in your previous company, you have two options. First is that you can transfer the stocks straight to your IRA, which will avoid the stocks from being liquidated. Second is that you can sell your stocks and pay the rollover into your account. But this should be done within 60 days, failing to do so can impose taxes on it.
What if all these options don’t fit your situation? There’s the last chance, cash in the funds that are held in your 401k scheme. This can be a little pricey. It is because your employer is legally bound to withhold 20% of the funds, which is for tax purposes. But it doesn’t end there, you may also have to pay income tax, and a penalty of 10% for taking the cash out before your retirement period.
The 401k rollover gives you more opportunities to keep the plan, and if you are deciding to leave a job for a new one, consider the options being offered as to what process fits you. You can also speak to a professional pension adviser to help you decide on the matter, and whom you can discuss with your best option.