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Why Rollover a 401k Into an IRA? Some Facts You Ought to Know

If you’re like me, you’re probably wondering how to rollover a 401k into an IRA. 401k plans, which are employer-sponsored savings plans, have some good sides such as the fact that you can defer taxes on the contributions and earnings but in general the bad outweighs the good. Many people decide to rollover their 401k plans into IRAs in order to maximize their returns and have more flexibility.

People like to rollover 401k into IRA for increased flexibility, which many consider the greatest benefit in rolling over. The problem with 401k plans is that they are typically limited to certain assets and company stock. With an IRA, the account holder can invest in stocks, bonds, and mutual funds of his or her choosing and have a wider range of investment choices such as real estate. Real estate is the most stable investment out there and it offers very high returns in comparison to other investment venues. Another problem with 401k plans is that they are tied to the employer’s corporation and it’s possible that the employer will switch to a new plan or new company or make other changes favorable to the corporation but unfavorable to the account holders.

When learning about how to rollover a 401k into an IRA, your best bet is to learn how to rollover into a self-directed IRA. Self-directed IRAs offer the most diverse array of investment choices for the account holder. You might have heard of the self-directed 401k and think it’s similar but the latter is actually a lot less flexible. You still have very limited options with what you can do in a self-directed 401k. For example, some employers only allow a portion of the account to be self-directed while the rest of the account falls under the traditional plan.

When you research how to rollover 401k into IRA, your best bet is to learn the specifics about how to rollover into a Roth IRA. Roth IRAs are the most beneficial because contributions are made with money that has already been taxed so it is not taxed at withdrawal when tax rates will most likely be higher.

If you want to know how to rollover a 401k into an IRA, it’s important to understand why it’s beneficial for you to do so. One perk is the ability to consolidate multiple 401k plans into one, which is much more convenient. Another perk is the fact that self-directed IRA accounts are managed by custodians and trustees that have a lot of experience and knowledge and best of all, they make the account holder’s wants a priority. On the other hand, 401k plans are managed by human resources representatives that are chosen by the employer, not the employee. Your account manager will certainly prioritize the company’s needs over your own.

Your next step? Start researching how to rollover a 401k into an IRA so you can experience the flexibility and benefits that comes with self-directing your own Roth IRA account. Don’t get me wrong. Having a 401k plan is better than having no retirement savings plan at all but the benefits of having a 401k plan pale in comparison to the benefits of having a self-directed Roth IRA. If you want to take charge of your financial future by diversifying your investments and getting higher returns, get out there and rollover into a self-directed Roth IRA.