Episode #55 – Important Things You Should Know About 401k Rollovers

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Today’s Smart Money Question:

401k rollovers are useful tools for transferring retirement accounts. They give you more control over your portfolio and help to alleviate potential tax burdens. Let’s explore the benefits of 401k rollovers.

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Here Are Just a Handful of the Things That You’ll Learn:

Consolidation Is Key.

  • [1:37] – 401k rollovers enable you to consolidate your various retirement accounts. It’s a lot easier to know where your money is when it’s all in one place.

401k Rollovers Give You More Options.

  • [2:05] – A company-sponsored 401k plan typically has limited investment options. When you roll your money into an IRA, you can invest your wealth however you’d like. Stocks, bonds, commodities, real estate; you name it. It’s all about giving yourself control over your retirement accounts. Expand your investment horizons. Just remember to follow the rules and work with a professional. Please, don’t try this at home.

Work With A Professional.

  • 4:41 – Rolling your wealth out of a 401k and into another retirement account enables you to seek professional advice from a financial advisor. As long as your money is tied up in a company plan, you can only get help from the custodian of that particular plan. While they might be able to offer great advice on specific products within that plan, they aren’t able to advise you on your greater financial portfolio.

Fees And Tax Implications Of 401k Rollovers.

  • [6:55] – Don’t let anyone tell you their 401k is free. They’re probably full of bologna. The truth is, 401k accounts have all sorts of hidden fees attached. In fact, the average 401k has a fee of about one percent. This of course is on top of the expense ratio that comes with any particular fund. However, you can eliminate hidden fees. Working alongside an advisor, you can roll your 401k into another account and work to cut your costs. Furthermore, you can work to lift your tax burden as well. Just be careful. There are several stipulations that accompany 401k rollovers. If improperly executed, you could be hit with a rather large tab from dear old Uncle Sam.

What If I’m Still Working For The Company Where I Have A 401k?

  • [10:48] – Most companies will allow you to transfer money out of your sponsored 401k plan if you’re over age 59 1/2. You just have to check with your plan’s administrator or human resources officer.

How To Determine The Best Investment. 

  • 12:45 –  You might not like this answer, but determining the best investment for you depends on your unique situation. It’s all about creating a comprehensive retirement plan that’s suited to your needs and goals.

The Answer:

401k rollovers give you more control over your investing future, but they're complicated. Work with a professional who can help you eliminate fees while maximizing the potential for growth in your investments. - Smart Money Questions
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