Should You Consider a Rollover 401k IRA?

A rollover 401k IRA is a specific type of IRA, or Individual Retirement Account.  These accounts are created specifically for employees who want to rollover a 401k into an IRA and come in two different types – traditional and Roth IRAs.  In general, these accounts are easy to set up – most financial institutions offer them and they typically require very limited paperwork to establish.

Economists estimate that workers today will hold an average of 7-10 different positions within their lifetimes, most of which will be with different employers over time.  However, when preparing to make a job transition, many people forget about one thing – the 401k funds they’ve invested in their employer’s retirement account.  If the employee doesn’t know how to rollover 401k funds, they’ll continue to sit there, gathering dust as he or she moves on to greener pastures.

Of course, leftover funds in an old employer’s 401k plan will continue to grow, but you won’t be able to contribute additional funds to them.  You may also find your retirement investing goals hindered by the limited number of investment options each employer’s plan offers.  What you need is a rollover 401k IRA!

The following are a few of the reasons why you should consider a rollover 401k IRA:

  • Maximize Your Investment Options

When employers are setting up their company’s 401k plans, they tend to choose a limited number of mutual funds as investment options for their employee’s to choose from.  The primary reason for this is that employees often feel overwhelmed by too many choices, making them less likely to participate in a company-sponsored retirement plan.

However, the problem is that, while there may be some good investment options in your company-sponsored 401k plan; this limited selection may also be limiting your rate of return.  Rollover 401k IRA account providers generally offer many additional investment options, including individual stocks, exchange traded funds and bond funds.  When you perform a 401k rollover to IRA, you’ll have access to more investment opportunities, making it more likely that you’ll find a combination that suits your investing style and your retirement strategy.

  • Streamline Your Investing Strategy

Another problem with the situation described above is that it’s difficult to manage several different retirement accounts to be sure that your investments remain in line with your retirement goals without a 401k rollover.  Retirement portfolios need to be rebalanced from time to time.  For example, if your original plan called for 25% of your funds to be invested in financial and bank stocks, you’d want to take a look at your portfolio to see if the recent changes in the financial sector affected the value and proportion of stocks in your portfolio.

Carrying out these adjustments to several different retirement accounts can be time consuming – performing a 401k rollover to a single consolidated IRA account can help minimize the time and maintenance associated with re-balancing.

If you think a 401k rollover to an IRA might be right for you, talk to your financial advisor about the different 401k rollover options that are available today.

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