How to Determine Where to House Your 401k Rollover

When you invest in a 401k, you have the benefit of investing until your retirement even if you change jobs. However, in order to get the best return from your 401k, it is important that you handle your rollovers effectively every time you change your job.

Instructions

Difficulty: Moderately Easy

1. Ascertain if your new employer requires you to work for a certain period before allowing you into their 401k plans.
2. Check the investment options offered by your new employer. Every organization offers different investment options under the 401k plan.
3. Compare investment options offered by your new employer with the benefits of your Individual Retirement Account (IRA).
4. Get a direct rollover to the plan of your choice without liquidating your funds.
5. Leave your funds in your old employer's 401k plan, if you’re satisfied that plan.
6. Consult your plan administrator before making any decision. Remember, you can always use some professional advice.

Tips & Warnings

• It’s always better to opt for a direct rollover. Liquidating your funds would entail paying a 20% federal income tax on the amount and an additional 10% penalty if you are under 59½ .