Opened 12 months ago

Last modified 5 months ago

#264 new enhancement

Three Reasons to Transfer Your 401(k) Money Into an IRA

Reported by: anonymous Owned by:
Priority: major Milestone:
Component: Database Version:
Severity: major Keywords:


This market volatility can be pretty unsettling, especially if retirement is in the very near future. It's even harder to have to review those monthly or quarterly account statements and not have anyone to turn to for advice.

The government has temporarily ruled that employees cannot be advised by advisors who represent the custodians of their 401(k) plans. There is a concern that employees will not be getting unbiased advice.

Employees have to look elsewhere, but most employers have not provided independent financial education for their employees. As a result, many employees are not getting advice on how to effectively manage their 401(k) accounts.

In preparing to retire, many employees are unclear about whether they should leave their 401(k) account balance in the employer plan or roll it into an IRA outside of the plan. Here are three reasons to consider moving the funds into an IRA.

401(k) plans are limited in scope

Most 401(k) plans are limited to a select group of investment options. If the plan is held strictly with one investment firm, such as American Funds, it is possible that the breadth and variety of options is limited even further.

Ideally, there are advisors who are carefully monitoring the investment choices to ensure that the quality of the investments is maintained. Unfortunately, that is not usually the case. Retirement plan trustees are not always kept up to date on changes that should be made within the company's 401(k) plan, and employee access to advisors has been minimal at best visit the site for more information

Retirement years should not be the time to have a nest egg invested in funds that are not being monitored frequently. This is not the time to have an account maintained in an environment that restricts access to quality advice.

Access to funds in 401(k) plans is restrictive

Choosing to roll assets into an IRA allows account holders the opportunity to select an investment advisor who understands the retirement goals and is able to give advice that is consistent with those goals.

If an emergency arises while an employee is still employed, it is usually possible to take a loan against the 401(k) balance. The loan is then paid back, with interest, into the account through payroll deduction.

Once an employee terminates employment, the ability to borrow against the account balance is no longer available. The employee would have to request a distribution from the plan in order to access the funds.

With so much uncertainty right now, IRAs can provide easier access to funds when a need arises.

Inability to do a Roth IRA conversion

Some retirees are considering Roth IRA conversions so that they can have their accounts grow on a tax-free basis. In the year of the conversion, there will be a tax payment required on the dollar amount converted, but there will be no additional taxes on the gains earned in that account.

Most 401(k) plans do not allow for a Roth option. If a retiree wants to convert all or a portion of the account to a Roth IRA, it has to be done outside of the 401(k) plan.

It is important to remember that, in making the transfer, funds should go directly from the 401(k) plan to the new account. If the check is made out directly to the account holder, there will be a 20% mandatory tax withholding. Account owners under the age of 59 ½ will also see a 10% early withdrawal penalty. Both of these withholdings are avoided in a trustee-to-trustee transfer.

Attachments (0)

Change History (5)

comment:1 Changed 10 months ago by anonymous

One of the main reasons to transfer your 401(k) money into an IRA is market volatility. When you have your money invested in a 401(k), it's usually invested in mutual funds. However, when you have an IRA, you have a wider range of investment options to choose from, which can help you to minimize your losses. I minimize my time loss with the help of best write my essay website which is providing me assistant on financial papers to educational essays.

comment:2 Changed 10 months ago by anonymous

We at Sarkari Result Naukri understand this dream and goal of millions of students. Hence we have created a portal that keeps you updated on thes sarkariresult and jobs.

comment:3 Changed 9 months ago by North East Job

A Premier Website for Latest Government and Private Sector Jobs, Recruitment, Vacancies and Sakori in Assam and North East India States. East Job is a leading online career and recruitment source with contemporary technology that provides relevant careers to job seekers across the industry.

comment:4 Changed 9 months ago by North East Job

A Premier Website for Latest Government and Private Sector Jobs, Recruitment, Vacancies and Sakori in Assam and North East India States. is a leading online career and recruitment source with contemporary technology that provides relevant career to job seekers across the industry.

comment:5 Changed 5 months ago by anonymous

I want to save a lot of money for retirement, but I'm not so good with money. The problem is that my financial planning is bad. These days, I watch a lot of personal finance videos on YouTube?. I even watch these videos late at night. To do this, I ordered noise-canceling headphones from HighShop, which have made my life much easier.

Modify Ticket

Change Properties
Set your email in Preferences
as new The ticket will remain with no owner.
as The resolution will be set. Next status will be 'closed'.
to The owner will be changed from (none) to the specified user. Next status will be 'new'.
The owner will be changed from (none) to anonymous. Next status will be 'assigned'.

Add Comment

E-mail address and name can be saved in the Preferences.

Note: See TracTickets for help on using tickets.