Gain Flexibility in Your Investments with a 401(k) Rollover
When your company offers a 401(k), it’s a convenient way to invest and plan for retirement. However, there’s a limit to how you can invest in a 401(k), so it’s better to roll over your 401(k) into an IRA account, preferably a Roth IRA. Some reasons to do a 401(k) rollover include:
- Lower fees
- Less taxes
- More ways to invest
Benefits of a 401(k) Rollover
Some 401(k)s that come from employers charge hefty administrative fees. It’s not enough to turn people away from using it, but it can add up. Plus, there are better options out there, such as an IRA. IRAs typically have lower fees or no fees at all, making it a better choice to invest in than a 401(k).
With a 401(k), investors receive a deduction for each annual contribution. This reduces their taxable income. However, when withdrawing funds in the future or during retirement, investors have to pay taxes on their contributions and the money in the account.
With a Roth IRA, investors can withdraw money after the age of 59 ½ without paying taxes as long as the account is more than five years old. Additionally, the money invested into a Roth IRA is usually after-tax dollars. Since the money is already taxed, investors can withdraw the money anytime without paying taxes. If they invest in a Roth IRA early in their career, they will probably be taxed at lower rate than they would pay later. Investors can take out loans with a 401(k), but if they withdraw money from a 401(k) before 59 ½, there will be a steep penalty.
More Ways to Invest
When investors have a 401(k), they can only invest in a few mutual funds and other investment choices. However, with a Roth IRA investors can choose to invest in a wider variety of options, such as real estate or gold. These investments can increase the funds in your Roth IRA without having to work harder; these funds will grow on their own in addition to the money you make while working.
401(k)s do have some benefits and they’re convenient for employees, but in the long run, Roth IRAs will pay off in retirement. Rolling over a 401(k) to a Roth IRA will save money on paying taxes, allow money to stay in your IRA account, and help funds grow faster than a 401(k).
Retirement. Your vision. Our passion.
At Macino Financial Services we assist our clients with 401(k) rollover to ensure retirement is relaxing. Give us a call at 419.491.0909 to schedule your complimentary review.
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