Want to learn how to rollover a 401k the easy way? Most investors do.
Whether it’s how to rollover, how to allocate or how to understand your fees, the 401k – especially the 401k rollover topic – is one that’s on the minds of many investors. So rest assured, you’re not alone.
This process usually takes just a few simple steps. It typically begins with your former employer’s HR department, or online with your login credentials.
First, you’ll want to make a few decisions:
Decision #1: Let the experts navigate the markets for you, or manage the assets yourself
Here at Alphavest.com, we manage your assets for you. However, if you’re more of the DIY type, you can choose an alternative low-fee provider like Fidelity or Vanguard where you can manage the assets yourself.
Decision #2: Take money out or keep it working for you, in an IRA for retirement
I strongly urge all 401k account holders NOT to take a distribution from your 401k (in other words, take money out directly from the Plan).
A rollover to an IRA is always the best option, EVEN IF you need to make a withdrawal soon. It’s still best to rollover the entire balance to an IRA and THEN make a withdrawal. Of course, if you’re not yet 59 ½ IRS will apply.
Otherwise, if you withdraw funds directly from the Plan BEFORE you rollover the balance to an IRA, your employer will withhold a mandatory 20% for the IRS to defray any future taxes and potential fees you’ll owe come next tax filing.
So in essence, avoid leaving your 401k behind. And NEVER withdraw funds directly from the existing 401k.
Beyond that, the only decision you’ll need to make is WHERE you want to rollover the assets. In other words, decide which IRA Custodian is right for you.
Additional things to consider
Do you want to manage your own account?
If DIY is for you, then investigate which custodian will offer you the flexibility you seek. Remember that “Investor Bad Behavior” can cost you tens of thousands of your hard earned retirement dollars and try and not become another investing statistic.
If you don’t opt for DIY, you will need to decide what type of Advisor you seek; Active or Passive investment management.
Buy and Hold? Or a more tactical approach that aims to steer clients away from down markets?
Not all IRA Custodian’s or Investment Advisors offer an active management option whereby you can hire an advisor to manage it for you. However, we do offer an active option, whereby the Vanguards of the world will require you to pick your allocation/funds similar to how you initially invested your 410k (ahem, broken).
No matter what, seek an Advisor/Custodian that will offer unlimited, unbiased LOW fee investment options.