Are you planning to retire in the near future, or have you recently or left your job where you had a 401(k)? The good news is that since these accounts are tied to your employer, once you cut your ties with that employer, you?re generally entitled to do what you wish with those funds. Unfortunately, many individuals take losses and/or penalties by withdrawing their funds. The best option is to rollover your 401k into an individual retirement account (IRA).<br><br>A 401(k) rollover allows you to transfer your existing investments without being subject to unnecessary taxes or withdrawal penalties. Remember, retirement accounts like a 401(k) are funded with pre-tax dollars, and grow tax-deferred. That means if you take a premature distribution, the IRS is going to stick you with taxes on all of that money, and also apply an additional 10% penalty if you withdraw the money prior to age 59 1/2. This is a pretty raw deal if you don?t need that money for a dire emergency, yet so many people will take the penalty simply because they don?t know how to do a rollover.<br><br>401k Rollover Options<br>The first decision you need to make when it comes to rolling over your 401(k) is where you want to roll the money to. There are three primary options that I?ll discuss here and provide some of the benefits and drawbacks of each.<br><br>Learn More Visit: http://www.Rolling401k.com<br><br>Rollover Into New Employer?s 401(k)<br>If you find new employment and they also offer a retirement plan such as a 401(k) or 403(b), in most cases they will allow rollovers into your new account. But is this a good idea?<br><br>Pros: The benefit of rolling into your new employer?s 401(k) is that it doesn?t matter how much money you have since there are generally no investment minimums on the fund options. If your rollover isn?t that much, you may find that you don?t have enough money to properly diversify your money with a particular mutual fund company. In some cases, you need a minimum investment of $3,000 just to invest in a single mutual or index fund at a fund company. If your 401(k) balance is low, say $5,000, it will be harder to diversify that money than if you were to move it into the new 401(k) where you could spread the money out regardless of how much you have to invest.<br><br>Cons: Aside from that primary benefit, there are also plenty of drawbacks. First, is that you?re losing a lot of flexibility. Remember, these are employer-sponsored accounts, so as long as you?re an active employee, you?re bound to that plan and its rules. This means you?ll be stuck with whatever investment choices they offer, and will not have access to your funds again unless you want to take a loan (if it?s allowed) or you terminate employment. In addition, a lot of 401(k) plans have relatively high fees. This is especially true for smaller employers. You could find that you?re paying on average 1% or more for each investment when you could easily find a comparable investment outside of the plan for half that.<br><br>Rollover Into a Brokerage IRA<br>Another common option is to roll over your 401(k) into a brokerage IRA account. This can be done at almost any financial institution, but most often people flock to the discount brokers where trades have low or even no commission.<br><br>Learn More Visit: http://www.Rolling401k.com<br><br>Pros: Brokerage accounts provide the ultimate flexibility. In a 401(k) you?re typically bound to just mutual or index funds. This is great for most people, but there are a lot of other investment options out there. The biggest benefit in a brokerage account is being able to take advantage of Exchange Traded Funds, or ETFs. With thousands to choose from, low expenses, and no investment minimums since they trade like stocks, these can be an attractive investment vehicle for a retirement account. Not only that, but with a brokerage account you can buy individual stocks, mutual funds, individual bonds, and in many cases, even things like options and CDs. So, if ultimate flexibility is what you?re looking for, a brokerage IRA is going to provide it.<br><br>Cons: Even though there are many great benefits with this option, there are obviously going to be some drawbacks as well ? the biggest being cost. Unlike investing in most mutual funds that just have a built in expense ratio, with a brokerage account you?re going to be charged a fee each time you place a trade with most brokers. And if you trade an ETF, you?re also dealing with recurring expenses built into the fund on top of the trade commission. Also, some brokers will charge a transaction fee to place a mutual fund trade that you otherwise wouldn?t have inside a 401(k) or if you had an account directly with the fund company. The good news is that you can eliminate most of these fees by opening a brokerage IRA with a free or discount broker such as Zecco or TradeKing.<br><br>Rollover Into a Mutual Fund Company IRA<br>The third main option for rolling over your 401(k) is to roll it directly into an IRA held at a mutual fund company. Popular fund companies include Vanguard, Fidelity, T. Rowe Price, and so on.<br><br>Pros: Rolling directly to a fund company will typically be the cheapest way to invest in their funds. There are no commissions, and in most cases, no account fees if you meet some basic requirements. It can also be helpful to stick with one provider so it?s easier to keep track of your investments.<br><br>Cons: If flexibility is what you?re after, this may not be your best option. For one, you?re basically tied to this fund company?s offerings. While most fund companies will have plenty of options to satisfy most investors, if you want to dabble in individual stocks, ETFs and so on, you?ll more than likely need to then open a separate account with a brokerage to do this. In addition, you have investment minimums to contend with. All fund companies are different, but most require that you have anywhere between $500 and $3,000 to invest in a single fund before you can buy any shares. For smaller accounts, this might mean being unable to invest anything, or only buy one fund until you save up more money to invest in another.<br><br>Summary<br>There are many different options available to you when it?s time to complete your 401k rollover. Each method has its own pros and cons, so don?t become paralyzed. The worst thing you can do is withdraw the money and suffer the tax consequences and penalties.<br><br>Learn More Visit: http://www.Rolling401k.com