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.
You can always leave the money in your 401k retirement fund with the fund offered by your soon-to-be previous employer, and avoid a 401k rollover altogether. You can also rollover your 401k into an IRA, and control the fund yourself. IRAs also tend to offer more investment options, such as mutual funds, than 401ks.
A 401k rollover can be a confusing and complicated thing, so before you make a decision, be sure to consult with a financial adviser or a representative from your company’s human resources department.