Once you take the plunge into retirement, it’s time to start thinking about your 401K again. You’ve worked hard to build up your nest egg, and there are some things you need to do to protect it. One of those things is remove it from anything that associates it with your former employer. Rolling your 401K into an individual retirement account is a smart move, and here’s 5 reasons why.
1. Avoid Fees
Your 401K has fees associated with it such as administrative fees. By rolling your retirement money into an IRA, you can minimize or eliminate this fee. Also, some 401K plans charge a maintenance fee if you are no longer employed by the company holding it, so look into your employers rules and regulations carefully before you sever ties.
2. More Control
Many of the 401K plans out there are restrictive. They might have rules about how employer-contributions can be invested or saved. They may even have one set place that it’s invested that you have no control over. While these restrictions might not seem like a bad thing when you’re an employee and your employer is matching your contributions, once you are retired it can make a big difference. Once you’re on your own, it’s nice to have complete control over your money and how it’s invested. Rolling over your 401K can give you back the control you need.
3. Employer Stock
Many employees take advantage of employee stock options through their employers. This is where employees can invest in the company’s stocks for slightly less than the market price, or they can invest in the stocks at market price, but with pre-tax dollars. While this initially seems like a good deal, if your employer goes out of business, not only will you be out of a job, you’ll also lose your savings. Look at Enron for a good example of why employer stock options aren’t always the best choice.
If you’re the type of worker that frequently job hops, you may end up with several 401K’s spread amongst various employers. This can get tricky to manage and fees from all of the separate accounts can add up. Instead of having your retirement savings spread out, consolidate them all into an IRA to save on fees, maintenance and frustration.
5. Plan Changes
Once you have retired, it may be difficult to stay up-to-date with plan changes that occur. Some changes can be big and make a large impact on your retirement savings. Instead of relying on your former employer to make smart decisions and inform you of them in a timely manner, take control by rolling over your 401K. Then you will never have to rely on someone else to keep you up to date again.
Rolling over your 401K into a an IRA is a smart decision once you reach retirement. You’ll enjoy lower fees, greater control and a greater peace of mind by knowing that your nest egg is safe and sound. Don’t delay, create your plan and take action today.