Top 5 Reasons to Roll Over Your 401(k) to an IRA

September 8, 2020

If you are switching jobs, you must begin to think of what decision you will make concerning your retirement savings. If you were contributing to a 401(k), you will be faced with a number of options as to what kind of plan to roll over your funds to. Choosing to roll over your 401(k) to an individual retirement (IRA) is among the best of the available options. In this article, we will look at 5 reasons you should choose an IRA.


1. Access to More Investment Options

401(k) plans are really limited when it comes to investment options. The average 401(k) plan gives employees access to an average of 8 to 10 investment options. With an IRA, you will gain access to an abundance of investment options. You will be able to invest in individual stocks, bonds, ETFs and many more.


2. Possibility of Lower Fees and Costs

Rolling over your funds into an IRA can save you money in management fees, administrative fees, and fund expense ratios. These fees and other potential fees tend to reduce your balance a little more than you are aware. On this premise, a 401(k) may prove much more expensive to maintain than other plans in its asset class.


3. Benefit from Cash Incentive

Those who manage retirement plans benefit from you placing your funds in their plans. This means that they are usually willing to give cash incentives to you for joining their company. There are companies that will offer you up to $2,500 when you choose to roll over your 401(k) to an IRA that they manage.


4. IRAs Have Fewer Rules

401(k) plans can be complicated and filled with subjective policies that will take you a considerable amount of time to grasp. This is because employers have a lot of room to craft their own policies for the use and management of the plan. On the other hand, IRAs are guided by standard rules established by the Internal Revenue Services (IRS).


5. Flexibility with Withdrawals

While your 401(k) plan will permit regular withdrawals within certain parameters, you will find that IRAs are more flexible in this regard. The administrators of many 401(k) plans will not give you the power to choose which investment your funds are taken from to satisfy your withdrawals. On the other hand, you will have the ability to instruct your IRA manager as to which investments you want your money to be withdrawn from.


Final Words

These are only a few of the benefits that may result from you rolling over your 401(k) to an IRA. From assessing these pros of choosing an IRA, you can see why many are choosing to roll over their funds to IRAs after switching jobs.

Rahul Iyer

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