If you have a 401(k) retirement fund, you have probably been spending a lot of time stressing over it recently. The economy has been hit hard and many people saw the funds in their 401(k) plans seriously drop in value. To make matters worse, many people continue to lose their jobs all over the country and are wondering what to do with their 401(k) plans since many companies cease participation if you no longer work there.
The good news is that you can perform a 401(k) rollover, in which you taking the money from your current 401(k) and roll it over into a new retirement savings plan. Of course, as with most financial transactions,there are 401(k) rollover fees.
Why 401(k) Rollover Fees Exist
When you roll your money from one 401(k) fund into another, or roll it into an Individual Retirement Account (IRA), Roth Individual Retirement Account (Roth IRA) or any other kind of retirement savings account, you have to take special steps in order to fulfill certain legal, statutory requirements as stipulated by the government.
Other Costs to Be Aware Of
With a 401(k) retirement plan, you are not allowed to access the funds in it until you reach the age of 59-and-a-half without being heavily taxed and penalized for doing so. That’s because 401(k) plans are specifically designed for retirement and have all kinds of tax incentives associated with them to make sure you don’t use the money before retirement. If you do access the money in your 401(k) before retirement, you’re going to see the government–both state and local–take out a huge portion in taxes and penalties.
When you rollover your 401(k) into an IRA or a different 401(k), you have to make sure that you don’t touch the money; have your former employer move the money into the new employer’s 401(k) fund or pay a financial professional to move the money for you to avoid being taxed heavily.
To learn more about 401(k) plans, 401(k) rollover fees, IRAs, Roth IRAs or any other investment option, be sure to consult with a financial professional.
Photo Credit: Miki Yoshihito