8 Reasons Why You Should Roll Over Your 401(k) to an IRA
When it comes to retirement savings, many people are unaware of the benefits of rolling over their 401(k) to an IRA. In this article, we will discuss the top 8 reasons why you should consider rolling over your 401(k) to an IRA.
Reason 1: Greater Investment Options
One of the biggest advantages of rolling over your 401(k) to an IRA is the increased investment options available. IRAs offer a wide variety of investment options, including stocks, bonds, mutual funds, and ETFs, whereas 401(k) plans are typically limited to the investment options offered by the employer. This gives IRA investors more flexibility and control over their retirement savings.
Reason 2: Lower Fees
Another benefit of rolling over your 401(k) to an IRA is the potential to lower your investment fees. 401(k) plans often have higher fees associated with them, such as administrative fees and high-cost mutual funds. By rolling over to an IRA, you may be able to lower your overall fees, which can have a significant impact on your retirement savings over time.
Reason 3: More Control Over Your Retirement Savings
When you have an IRA, you have more control over your retirement savings. With a 401(k) plan, you are limited to the investment options offered by your employer and are subject to their vesting schedule. With an IRA, you have the freedom to choose your own investments and are not subject to vesting schedules.
Reason 4: Tax-Advantaged Growth
Both 401(k)s and IRAs offer tax-advantaged growth, but IRAs offer additional tax benefits. For example, with a traditional IRA, contributions may be tax-deductible and any growth within the account is tax-deferred. With a Roth IRA, contributions are not tax-deductible, but withdrawals during retirement are tax-free.
Reason 5: No Employer Restrictions
A 401(k) plan is tied to your employer, meaning if you leave your employer, you will need to decide what to do with the money in your 401(k) plan. With an IRA, you have more options and can take the money with you if you change jobs. Additionally, 401(k) plans may have restrictions on when you can access the funds, whereas with an IRA, you have more flexibility in terms of when you can withdraw money.
Reason 6: No Age Restrictions
With a 401(k) plan, you are required to start taking distributions at age 70 1/2. With an IRA, there is no age at which you are required to start taking distributions. This allows you to keep your money invested for longer, potentially allowing for more growth.
Reason 7: No Required Minimum Distributions
In addition to not having age restrictions, IRAs also do not have required minimum distributions. This means that you can leave your money in the account for as long as you want, allowing for continued tax-deferred growth.
Reason 8: Estate Planning Benefits
Rolling over your 401(k) to an IRA can also provide estate planning benefits. With a 401(k) plan, the beneficiaries you designate will receive the money in the plan, but will be subject to required minimum distributions. With an IRA, you have more options for beneficiary designations, such as naming a trust as the beneficiary, which can provide more flexibility and control over how the funds are distributed.
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