401K ROLLOVER

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.

If you’re afraid to look at your 401(k) statement this quarter, you’re not alone. The stock market nose-dive has taken its toll on the retirement savings of millions of Americans. What you might not know is that for most people, your average retirement account is not the most well-rounded portfolio you can get. In fact, there are five common problems with the average American’s 401(k) plan that might be leaking money from your retirement fund. Take a look at these and see if any of them sound familiar.

The Useless Tax Deduction

Do you have a 401(k)? If you do, chances are that your 401(k) is part of a program offered by your employer. If you are about to change employers, or if you’ve recently lost your job – a more common occurrence today – then you are probably wondering what to do with your 401(k) fund. If your employer allows you to participate in their 401(k) plan, and many employers will, you could always leave it where it is. You could also rollover your account into an Individual Retirement Account, or IRA as they are more typically referred to, but there are 401(k) rollover fees to consider. When you roll over your 401(k) into an IRA, you will enjoy greater flexibility and have more diverse investment options. You can also do a partial 401(k) rollover – ask your employer for more information about this type of transfer.

401(k) Rollover Information

When it comes to the 401k retirement fund, many people have questions about how it operates, how and when you can access it, and other matters. Since many people start their 401k‘s under the auspices of their employer, one question in particular that many people have concerns the status of their 401k retirement fund when they leave or switch jobs. In this scenario, many people choose to transition their employer-sponsored 401k fund into an IRA (individual retirement account). Switching a 401k over to an IRA is called an indirect rollover.

If you’re moving on to a new job, congratulations. When you leave your old company, you’re going to be faced with the question of what to do with your 401k fund. You could take a check for the full amount, but if you do that before you reach retirement you’re going to be severely taxed and penalized for early withdrawal, and you’ll lose a lot of your 401k savings. You could also leave your 401k with your soon-to-be previous employer, or do a rollover into your new employer’s 401k program. Many people, however, like to do an indirect rollover, that takes the money from their previous employer’s 401k program and puts it into an IRA. An individual retirement account offers people almost all of the same benefits as a 401k, as well as more investment option flexibility. If you decide to do a rollover or an indirect rollover of your 401k, be sure to have a trustee do it so that you don’t get penalized for taking control of your money.

If you work for a company that offers a 401k retirement plan, and you participate in it, you may be getting company stocks as part of the deal.

If you are, you could also see those company stocks get special tax treatment. The company stock you have in your 401k plan requires some special consideration should you be moving to a new company, or thinking about rolling over your 401k funds into an IRA. 

Companies that offer their stock as part of their employees’ 401k retirement funds do so because the employees will receive special tax treatment for these stocks. So, let’s say you buy $50,000 worth of company stock as part of your 401k. You then decide to rollover your 401k money into an IRA.

Many people open up their 401k retirement fund through their employer. Many companies will match your deduction to your 401k retirement fund to a certain amount, so it makes a lot of sense financially. However, people can and do leave their jobs all the time, prompting many people to wonder how the process of moving a 401k from one company to the next works. The answer is called a “rollover.” A rollover is just what it sounds like: the moving of a 401k from one company into another comparable fund, like an IRA (Individual Retirement Account) or your new employer’s own 401k program.

When you do a 401k rollover, you have to make sure that you never actually “touch” the money in your 401k fund. This is because if you do, it will be seen as you accessing the money in your 401k fund, something you are not allowed to do until you actually retire, or if you are facing extreme hardship. You can access the money in your 401k any time you’d like, of course, but you will be heavily taxed and penalized for it, and just about all financial experts advise to do so only if you really, really have to. So, in order to avoid having access to your money, you need to get a trustee to perform the 401k rollover for you.