401k rollover can help you avoid fees that your former employer may charge you if you leave your account there. But you must be careful not to make mistakes in your rollover process.
First of all, you need to make sure that you fill all forms correctly. Don’t be in hurry when you fill the forms. Make sure that you understand each item and put in the correct information. Double check what you’ve put in. It takes extra effort but it can help you prevent costly mistakes.
Second, don’t ever withdraw your fund. You may think that cashing in your 401k is a good way to choose when you leave your employer. But that’s not true. The truth is doing that will only give you heavy penalties. Why? Because your 401k plan is meant for retirement. The government has put rules in place to prevent you from using the money before you retire. So if you withdraw the fund before you are 59 1/2 years old you will suffer penalties that will hurt you in the long term.
Third, you need to make sure that your new account is ready to receive your 401k rollover. There are several options you can choose for the destination of the rollover: a new 401k, a traditional IRA, and a Roth IRA. Whatever you choose, make sure that you already set up your account and get it ready before you initiate the rollover process. This way you prevent the possibility that something goes wrong and you are forced to cash in your fund. As stated above, cashing in in your fund has very bad consequences on your personal finance.
If you follow the advice above, you will have a smooth 401k rollover that will help you maintain a healthy personal finance situation.