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Should I Rollover My 401k?

What even is a 401k rollover? This just means moving money from your employer retirement account once you no longer work for them. You have a few options when doing this! You can take that money and cash it out. BEWARE: you will have to pay a penalty as well as taxes on the money […]

What even is a 401k rollover?

This just means moving money from your employer retirement account once you no longer work for them. You have a few options when doing this!

You can take that money and cash it out. BEWARE: you will have to pay a penalty as well as taxes on the money you take out of your 401k, so this isn’t really an ideal option. 

You could move it into an individual retirement account (an IRA) so you can have your own investment choices, unlike a 401k where your employer picks a certain group of investments for you to choose from. With an IRA you can invest in stocks, bonds, ETFs, mutual funds, or whatever it is you want to invest your money in! A lot of people choose an IRA for the freedom it gives them when investing. This can be good or bad. 

If you take your money out and put it in risky investments, you could be setting yourself up to lose money. If you had kept that money in your 401k, your investment would have been more stable since your employer likely chose those stocks for a reason.

One thing to do is find out how much you’re paying inside your 401k. Most likely you’re paying a small fee, but it’s good to be aware of them! If they are high fees, you may be better off moving the money into an IRA without fees. If you need help building a portfolio, here’s a video that can help you through the process! 

You could leave it where it is in your old employer’s 401k plan. If your money is stable and growing where it is, you may just want to leave it there. This can also be a good way to reduce the temptation of cashing it out.

You could also choose to roll it into your new employer’s 401k plan. This is a great option if you decide you don’t want to have to pick your own investments. If you tend to suffer from paralysis from analysis, this could be a good option to narrow down your options. 

In the end, what you decide to do is completely dependent on your personal preferences when it comes to investing! If you feel ready to select your own investments, an IRA may be the way to go. If you would rather have options to choose from, you may want to leave it where it is or roll it into your new employers 401k plan.

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