How to Roll 401K over to an IRA
Have you left your old job? Did you leave the 401K with the old company? This article will explain how to roll your 401K over to a self directed IRA.
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Instructions
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There are three cases where I do not think it is wise to roll over your 401K.
The first case is when you leave your former employer after the age of 55 and are under the age of 59&1/2. If you meet this criteria you will not have to pay a 10% penalty from your 401K but will have to if you take money from an IRA. Once you reach 59&1/2 by all means roll it over.
The second case is where you have less than a thousand in your 401K and have no IRA anywhere else and your old employer will let you keep it in their plan without any fees. There are very few institutions which will accept less than one thousand dollars.
The last reason is that you know you do not have the will power not to do something unwise with the money. In a self directed IRA you can buy penny stocks, options, and host of high risk investments.
If you are like most people and do not fall into the above go to step two. -
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Decide where you are going to put the money. A lot of this will depend on how much money you have. If your 401K is with a large fund house such as Fidelity or Vanguard they may have a no fee option for you depending how much money you have. They will be very helpful in rolling the money over to an IRA. If you have one to twenty five thousand most often your best option will be with a mutual fund company direct. Again they are often pretty helpful in rolling over your money. Another option is an online broker. I do not like this option. They often have a lot of fees. People in these accounts are too tempted to trade and often end up with nothing.
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Decide on your asset allocation in your IRA. Invest in the best mutual funds. Check out my other articles concerning mutual fund selection.
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Complete the required paper work. Verify your funds have been transferred.
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Invest wisely!
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Tips & Warnings
Avoid taking possession of your money. An electronic transfer can usually be completed. Save all related tax documents.
