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Can I rollover my 401(k) into something else?

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By Michael Guerin


or... what to do next

The short answer (and this hub will be kept to a minimum) is yes, you can roll your 401(k) into an IRA. Specifically, a Traditional IRA.

The first step is to open a Traditional IRA. You can choose from a lot of providers. I won't go into investment options (for understandable reasons), but when you set up the IRA, the application will offer choices, like cash contribution, rollover from existing plans, etc. This is basically a transfer request.

Before you submit this paperwork to open the new IRA account, make sure you contact your current provider (i.e. wherever your 401(k) is currently held, like Fidelity, etc.). Most likely they have a form you'll need for making a "direct rollover." With a direct rollover the funds never come to you, i.e. the check is NOT made out in your name.

Submit this form with the IRA application and the back office takes care of the rest (i.e. if it's a mutual fund company, fee-based investment platform, etc., they handle the transfer directly).

Moving forward, since you are not an independent contractor (1099), you are self-employed. You can choose to set up your own retirement plan in order to make contributions each year. The Traditional IRA doesn't allow for large enough contributions (i.e. deferral of income), so you might want to consider a SEP IRA. That is a common choice or a lot of independent contractors.

As always, make sure you consult the advice of your tax preparer/CPA, as well as a financial advisor (if you currently have a relationship with one) to ensure that the transition proceeds smoothly. I hope this brief overview answered your question with enough detail to help you in your decision process, and that it didn't complicate matters.

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retirementhelp  says:
10 months ago

Very good info. People many times feel they have to stay in their old 401K plan. Great hub, short and to the point!!

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