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If you recently left a position at a company, there is a good chance that you contributed funds to a 401(k) or another employer-sponsored retirement plan. Now that you are no longer with your former employer, you may wonder what you can do with those funds so they can grow. It’s a good time for you to learn the reasons why you should complete an IRA rollover so you can better prepare for your future.
One benefit of transferring your 401(k) funds into an IRA rollover is that it allows you to make more investment choices on your own. At your previous job, you did not have the ability to choose your own provider or the group of funds when you had the 401(k). But after you learn how to complete a self-directed IRA rollover/transfer to the firm of your choice, you have the ability to choose from a broader range of investments.
Another reason why you should complete an IRA rollover is that you will likely save more money on management and investment fees than you would if you kept it in the 401(k). Those fees can erode the returns that you built up and can be counterproductive to saving money for the future.
If you are unable to keep your money in your former employer’s 401(k) plan, rolling it into an IRA
allows you to keep that money growing tax-free. Although you will still have to pay taxes when you hit retirement age, the IRA rollover allows you to build up the money instead of losing a large percentage with an early withdrawal of the 401(k).
You can also convert your 401(k) to a Roth IRA when you perform a rollover. What makes a Roth IRA different is that you will pay taxes on the money when you contribute it, but it will grow tax-free. In this case, you will not have to pay anything when the time comes for you to retire and withdraw it.
Finally, when you decide to complete an IRA rollover, it’s a good idea to investigate the banks and financial institutions that will allow you to complete the transaction. Some offer you a financial bonus to bring your nest egg over to them. These bonuses can result in a fair amount of additional money on top of your investment.
Ultimately, an IRA rollover provides you with a nice way to build up money for your future. It allows you to create a good cushion so you can better enjoy your retirement with even fewer worries about your spending down the road.
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