What Is A 401K Rollover?

Practical and timely advice to help consumers answer the question what is a 401K rollover?

An individual who loses their job or chooses to leave their employer on their own will need to make some decisions about what to do with their existing 401K funds. A buzz word they will likely hear when trying to make a decision about the future of these funds is “rollover.” What is a 401K rollover though? It’s vital to understand how a 401K rollover works and the options that are available because this is truly the best move to protect 401K retirement savings.

Definition of 401K Rollover

A 401K rollover involves transferring current 401K retirement funds to another qualified retirement account. Individuals who opt to take an early distribution before the age of 59 1/2 will probably be subject to a heavy 10% IRS penalty as well as unnecessary income tax payments on the money. This is a trap that many individuals fall into when they aren’t able to answer the question what is a 401K rollover. There are several options for rolling over 401K savings that will enable consumers to avoid losing a significant part of their retirement savings by taking a premature distribution.

401K Rollover Choices

An individual who finds employment with a new company may opt to rollover their existing retirement funds into the new employer’s 401K plan. This is a relatively simple process and is a good option for those who find that their new employer offers this benefit. Another option for a 401K rollover is to transfer funds into a brokerage IRA account. Financial institutions and discount brokers offer these services. Major fund companies such as T. Rowe Price and Fidelity are another choice that individuals may want to investigate when determining how to reinvest their 401K retirement savings. These mutual fund companies offer their own IRAs and economical fee structures in most cases.

Related posts

1. Where To Rollover A 401K?
2. What is a 401K Rollover?
3. How do I Rollover My 401k?
4. Can You Rollover An Ira To A 401K Without Penalty?
5. What Tax Forms Do I Need To Rollover My 401K Into An IRA?

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