401k Rollover

What is a 401k rollover?
A 401k rollover is an opportunity for someone to transfer money in their current 401k plan from one financial institution into another.

Why would I want to do a 401k rollover?
A 401k rollover is commonly done when there is a change of employment and you longer wishe to have your 401k managed by your previous employer. Another reason is that someone may not be happy with the return on the investment their fund manager is currently getting for their 401k.

Do I have to do a 401k rollover when I change employers?
No. If you are happy with the performance of your previous employer's plan, you may elect to leave the money in your current plan. However, the ability to take loans out against your 401k plan may no longer be an option. If you think you may need to take out a loan against your 401k, please consider a 401k rollover.

Why don't I just cash out my 401k plan when I change employers?
If you cash out your 401k plan, 20% of your money will be witheld by your previous employer. This witholding is used to pay the early withdrawl penalties imposed by the IRS. By using a 401k rollover, you avoid this penalty and all of your money can continue to grow tax-deferred.

When I get a 401k rollover, do I have to put the money into another 401k?
No. You can put your money into another 401k with your new employer, or an Individual Retirement Account(IRA). IRAs are are offered by many financial institutions. Each institution can invest your IRA funds into a multitude of investment opportunities. When shopping for an IRA, compare management fees that may be charged by each financial institution.

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