It’s the age old question when leaving an employer:

Should you rollover your 401k?

The answer to that question depends on a host of different variables. Today we’re going to talk about four reasons why you should consider rolling over your 401(k) account to an IRA product.

When the Investment Options Aren’t in Line With Your Investing Goals

Most people, as they near retirement age, prefer safety and security in their retirement accounts as opposed to high-risk growth. If your 401(k) plan’s investment options are too risky for your comfort level, or if the plan’s options simply aren’t in line with how you want to manage your retirement funds, it may be time to roll over your 401(k) to an IRA account. If you don’t have an IRA account, check out Ally Invest that offers trades as low as $4.95.

To Save Money on Fees

In many cases, fees on 401(k) accounts are much higher than fees on IRA accounts. Some 401(k) holders are paying thousands of dollars in management fees per year, depending on the investment management firm their employer or former employer is using and how the contract with the investment firm is set up.

Tip: Check out Blooom which will give you a free analysis of your investments in your 401k.

IRA’s generally have much lower fees than 401(k)s, meaning a rollover could save you as an investor hundreds and maybe thousands of dollars per year.

To Gain More Investment Options

When you have your retirement funds in a 401(k), your investment options are limited to the 401(k) plan’s (usually few) options.

A rollover to an IRA product means you gain a vast array of investing options for your retirement funds. Along with traditional stock, bond and mutual fund options for IRA investing, there are also options to invest your IRA in different types of investments including:

  • Precious metals
  • Business development companies
  • Mortgages and REITs
  • Bank IRA/CDs

It’s always best to consult with a financial expert before deciding the best type of IRA investment or investments for you, but it’s nice to know that rolling over your 401(k) to an IRA does expand the number of investment options you have.

If You Want to Cut Ties with Your Former Employer

Whether you’ve left your company as a plan for retirement or early retirement, or whether you’ve been laid off from your former company, it’s clear that not all employer/employee parting of the ways are good ones. And even if you are parting with your employer on good terms, it may be that the company is no longer doing as well financially as it once was.

Surprisingly, many companies still require that employees invest a chunk of their 401(k) funds – or at least invest company match funds – into company stock. If your former company isn’t doing so well financially that means an increased risk to your 401(k) retirement funds.

Or maybe you’re just ready to put the past entirely behind you and completely cut ties with your former employer.

Whichever the case may be, rolling over your 401(k) means you no longer have to have dealings with your former employer since an entirely different firm will be managing your new retirement product.  If you feel more comfortable no longer having ties to your former employer, a 401(k) rollover might be right for you.

As you can see, there are several scenarios where converting your 401(k) to an IRA product might be a better choice for you and for the growth of your retirement fund. If you find yourself in any of the four above scenarios, you might want to consider a switch.

Have you ever rolled over a 401(k) account?

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