3 Reasons Why You Should Rollover Your 401(k)

If you contribute to a 401(k) or other employer-sponsored retirement plans (403b, SIMPLE IRA, 457, etc.), you are eligible to rollover those funds to an IRA when you leave that employer. Rolling over a 401(k) to an IRA is a seamless process with distinct benefits. Here are my top three reasons why you should rollover your 401(k) when you leave your employer:

  • Personalize Your Investments

    • More often than not, employer-sponsored plans tend to be very vanilla, offering limited investment options to choose from. If you rollover those funds to an IRA, you can invest in a universe of different stocks, bonds, or exchange-traded funds (ETFs). With an IRA, you are unlocking a wide variety of options that can better suit your investment needs. Your investing goals may change as your life evolves. The 401(k) options you selected years ago might not reflect your financial situation today, whereas an IRA provides you more customization.

  • Streamline Your Savings

    • Once you establish your IRA, it is easy to rollover any additional 401(k) accounts you may possess in the future into the same IRA. This is beneficial if you change employers multiple times because an IRA prevents you from having various 401(k) accounts scattered across different employers. Consolidating your accounts eliminates the number of statements you receive and the number of logins you have to remember.

    • Be careful of the tax status on the contributions into your 401(k). For instance, you might own both pre-tax funds AND after-tax or Roth funds in your 401(k). If so, the after-tax and Roth funds need to be rolled over to a separate Roth IRA rather than a pre-tax Traditional IRA.

  • Boost Your Peace-Of-Mind

    • In a 401(k) plan, it is your responsibility to choose among the investments offered. Whether you randomly pick funds or deeply analyze each option, the onus of selecting investments falls on you. With a 401(k) rollover, it becomes very easy for a firm to manage the portfolio for you. Unless you enjoy managing your 401(k), having a trusted professional manage the account for you may alleviate any potential angst or stress you might have doing it on your own, resulting in greater peace-of-mind.

As you transition between employers, it is easy to forget about your retirement plan amid all the change. Or you may be unaware of the advantages of rolling those funds to an IRA. Tailoring your investments, consolidating your portfolio, and the peace-of-mind delivered from a trusted professional are three benefits you should consider.

If you have questions about rolling over your 401(k) or similar retirement accounts, feel free to contact me directly.

Hope you enjoyed reading!

Joshua J. Baird
Investment Adviser Representative