Roll your 401K over to an IRA

Are you no longer employed by your previous employer? Do you have a 401K? Most likely it would be wise to roll the money over to an IRA.

There are many advantages to rolling your 401K over to an IRA. You will have many more choices in which to invest the money. Your former employer will not have any effect on your investments. Many times companies change their 401K plans. Perhaps you simply do not want to have anything to do with your former employer.

There are some specific cases where it is not wise to roll over your 401K.

Most commonly if you leave your former employer after the age of 55 and are under the age of 59&1/2 it may not be in your interest to roll the 401K over. If you meet this criteria you will not have to pay a 10% penalty from your 401K but will have to if you take money from an IRA. Upon reaching the age 59&1/2 by all means roll it over as you will not have to pay a penalty to withdraw from and IRA either.

In another instance you may have less than a thousand in your 401K and have no IRA accounts to add to and your old employer will let you keep it in their plan without any fees. There are very few institutions which will accept less than one thousand dollars. In this case it is in your favor to leave the money with the old employers 401K.

Another reason is physiological. If you know you do not have the will power to misuse the money leave it with the old employer. I have seen people buy single stocks, penny stocks, options, futures, sector funds and a whole host of high risk investments and lose their savings.

Where you invest your money will depend on how much you have to invest. If your 401K is with a large fund house such as Fidelity or Vanguard they may have a no fee option for you depending how much money you have. Institutions are generally very helpful in rolling the money over to an IRA. If you have one to twenty five thousand your best option will most likely be with a mutual fund company direct. They too can be very helpful to you in rolling over your money. An option which I do not like is an online broker. Online brokers tend to have a lot of fees. You the investor may be tempted to buy that hot stock which ends up fizzling.

As with your 401K you need to decide on your asset allocation in your IRA.

By choosing your investments wisely you can significantly increase your returns.

As with your 401K you need to decide on your asset allocation in your IRA. Invest in the very best mutual funds be it the ,best mid cap, Small cap funds, International funds, Bond funds and even concentrated funds.

Remember to invest wisely!

Avoid taking possession of your money. An electronic transfer can usually be completed. The institution where you are investing your IRA is most often eager to help. Keep a record of all related tax documents.