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401(k) Rollovers

The staff here at Investment Insight Wealth Management, LLC understands how important saving for retirement is, and we know how complicated the process can be for someone who doesn’t work in the financial industry. If you’re switching jobs, keeping your retirement savings on track doesn’t have to be a nightmare.

401(k) Rollovers Defined

A 401(k) is a retirement savings account that’s invested in the stock market, provided by your employer. When you leave a job, you have three options: you can cash out your 401(k), your can keep it the current plan, or you can move it another qualified retirement account, through what is known as a 401(k) rollover. You become eligible for a rollover when you quit your job, or if you are fired from your job. You can rollover the 401(k) into an IRA or into your new employer’s 401(k) plan.

As long as you complete the transfer as a direct transfer, you should not run into any tax implications of the rollover. Before you can start the rollover, you’ll need to open the new account, either as an IRA through the financial institution of your choice, or as a 401(k) through your new employer. Inform your employer you want to rollover, using a trustee-to-trustee format. If you do not opt for trustee-to-trustee, you are subject to a 20% fee. From here, you’ll invest your money as before.

Typically, you are allowed one rollover transfer per year, unless you change jobs. If you attempt to rollover funds more frequently than this, you may be subject to fees. The rollover eligibility goes one year from the date of the transfer, rather than the calendar year, so if you transfer in July, you will not be eligible for another transfer until the following July.

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