How To Initiate 401K Rollover

Starting a new job is an exciting time, with a lot of things to do. One of the steps that many workers put off is rolling over an old job’s 401k into a new investment product. The fact is, the sooner you take control over your investments, the easier your task of monitoring them and managing them will be. There are a few things to do before you start that 401k rollover, but they are relatively simple, and they will make it easier to get the returns you expect from your portfolio.

First, you need to decide what kind of IRA you are rolling your old 401k into. If you already have IRA plans set up, you can choose to just use whatever account you have. If you don’t have both a traditional and a Roth IRA, this could be a chance to use the old 401k to jump-start one or the other so that you have your nest egg in a couple of different products with different advantages. Once you have decided which type of IRA you want and set up the account, you need to contact your benefits management people for the 401k rollover.

You want to request a direct rollover to them. The type is important, because a direct rollover sends the money directly to your specified IRA fund instead of to you, avoiding many of the tax penalties associated with cashing out a 401k plan. You will need to pay taxes in accordance with the rules of the fund you’re rolling into, but you won’t have the additional penalties that come from cashing out a 401k ahead of time.

Since the funds will be entering your IRA as cash, you will need to specify the investments you’re making to put that money to work. Once you do, you can decide on your level of involvement with the ongoing management of the fund. Many investment management firms have plans that allow you to basically take a hands-off approach once you dictate an overall strategy. There are also options that give you more input, and some that basically have you calling the shots while your plan manager moves the money for you. It’s a matter of what you want, how much time and effort you can afford to put into managing your investments, and whether you would be better served by managing other parts of your finances more directly instead. Start your 401k rollover today and take control over your money.

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