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For those who have the 401K as their retirement plan, life after work is much easier to deal with as you get to enjoy your savings. So what does one do if you need your retirement funds before maturity? Well, since the savings plan is yours and not your employers, you have the freedom to do what you want with your savings. This however does not mean that you should cut off your plan or withdraw funds. This is because this action comes with hefty penalties that could set you back thousands of dollars. In such situations, the 401K rollover is your best bet.
The 401K savings grow differed of tax and essentially this means that if you prematurely take out your money, the IRS has no choice but to tax you on the thousands you have saved so diligently which is a huge loss on your part. This happens to so many people , just because they are not aware of their rollover options.
Today, we discuss your 401K Rollover Options . The following are avenues to rollover your 401K funds:
I. IRA brokerage Account: This one of the most common rollover options taken up by people who have been terminated from stable employment or looking for other retirement plans. Brokerage accounts are beneficial because they flexible and open you up to more investment options.
II. Mutual Funds: Rolling over to a mutual fund company is an option for those looking for a cheap way to invest. If you fall in line with the basic requirements there are no fees though this is not always the case. However, no commissions are to be paid. On the other hand, your cash is essentially tied up to the company's offers and you will have to put up with the minimum requirements which tend to lock out many.
III. New employers 401K: The good thing about rolling over into your new employers 401K is that it is less stressing and you do not have to worry about having a minimum amount requirement. You can also diversify your investment depending on the amount available to you and you still have the matching benefits from your new employer.
Having decided that you want to rollover, you will need to follow the proper procedure. This is because you cannot afford to mess with your life savings. The forms may be a bit complicated to fill but you could always ask for help from a trusted 401K expert.
1. Eligibility: The first thing to do is check for your eligibility with your former provider. You will need to make sure that no fees will arise and that your record indicates you as an employee who has been terminated. Funds are not released if one is not terminated and if you are shown as an employee fines will follow you.
2. Get the Rollover forms from the previous provider: You will be expected to send over forms in order to begin your 401K rollover, it is therefore important to let your old provider know what you intend to do to get the necessary forms.
3. Requirements: Make sure you confirm with current provider on the requirements to ensure the rollover goes through smoothly. In some instances and depending on the option you are moving on to; an account must be opened before submitting your rollover documents. In order to save time, make sure you have all the information and documents you will need in order.
4. Form Completion: This tends to go wrong for people who are doing this without any help. The forms tend to have so much information in them and one may be tempted to vaguely go through the form. There may be things that you will not fully understand and you will need to ask the company involved for help. Small mistakes will end up derailing the process for days and sometimes weeks.
Once you have duly completed the form submit and follow up on the process. Some providers will want to hold on to the funds and will not tell you the information you need to speed things up unless you constantly follow up.
The 401K plan is without a doubt the grand plan to your financial freedom. When times call for you to move funds, you will need to have a good 401K rollover option in place.
Make sure you make the right decision to ensure that your savings do not fall into the wrong hands or encounter heavy fines.