401K Rollovers

What You Need To Know About 401K Rollovers

Most professionals wind up needing a 401K rollover at some point. As financial experts, we often get questions about 401K rollovers: everything from, “When should they occur?” to “What investment vehicles should they be put under?” to the basic, “What are they?” That’s why we thought we would take some time to explain the 401K rollover, and what it can mean for you.

What Is A 401K Rollover?

We’ll start with the most basic question: What is a 401K rollover?” Basically, a 401K rollover is when you take money out of a previous 401K and place it in a new retirement account. Sounds pretty simple, right? On the surface, it may be, but choosing when and how to rollover your 401K can affect what you take into retirement. An experienced financial advisor like Mateo Garcia can help you make the right decision concerning 401K rollovers.

When Does A 401K Rollover Typically Occur?

Typically, 401K rollovers occur when your employment status changes, especially when you are leaving one company and moving on to another. When this happens, you will have several options regarding your old 401K: 

  • Cash-out the old plan

  • Keep the money in the old plan

  • Reinvest the money in a new plan

Note that your options may vary according to what you are permitted to do in your specific situation--it doesn’t work the same way for everyone. If you do have questions about what you can do with your old 401K, make an appointment with a financial planning expert such as Mateo Garcia. While there is no right or wrong answer to what you should do with your retirement savings, we usually advise against cashing it out, as you will have to pay taxes on it and will likely be hit with early withdrawal fees as well. Some people choose to leave their funds in the previous 401K account, but this is not permitted under every plan. Also, there is a good chance that rolling your money into a new plan will help you expand your nest egg. This brings us to the third question.

What Investment Vehicles Are Available For A 401K Rollover?

When changing jobs, you may have the option to roll the funds from your previous employer’s 401K into your new employer’s retirement plan. But what if this option isn’t available, or that you find the new retirement plan is unsatisfactory? You are not bound to your new employer’s retirement plan. You may wish, instead, to invest your money in an Individual Retirement Account (IRA). Investing in an IRA is often the preferred choice, as it tends to offer more investment options and fewer fees than the other choices mentioned. You can also invest the money in stocks, mutual funds, or a number of other options, but self-managing your money in this way carries far greater risks than rolling your money into a new plan. Again, your best bet is to contact the offices of Mateo Garcia so that you can be confident you are making the right choice with your hard-earned money.


Contact A Financial Advisor

When it comes to planning for your family’s future, one of your best resources is an experienced financial planner. Advisors like Mateo Garcia have been helping families realize their dreams for years. We recommend contacting an experienced advisor like Mateo Garcia before planning any next steps.