New Ideas For 401k Rollovers

27 Jul 2010

401k rollover
Too many people avoid thinking about retirement until it is too late. The workers of today don’t have the same sense of security that their parents and grandparents had. But no one wants to dwell on old age and what it might mean for their independence and so they avoid the subject altogether.

No one said that retirement planning had to be a big deal. If you haven’t thought about an IRA before, consider setting one up. They are not just for self-employed. Simply set aside $100 a month for the IRA and forget about it. If you are older though, just putting a $100 a month in a retirement account is not going to cut it. People who make the median income or above (40k a year) should be serious about saving for retirement. As you get closer to retirement you have less time to use the power of the stock market. That means you need to bump up your savings. You might wonder why. Your investments simply won’t have time to mature properly in 20 years. At your age you can’t afford to take too many risks so concentrate on putting lots of cash into the account and choose moderate risk funds. To help with steady, low risk growth, explore the options within the funds. I bet there are a few really nice choices.

Don’t forget that you also have the ability to shift your 401k to your new company. The provision for a 401k rollover is standard. That flexibility extends to even putting the 401k funds into an individual retirement account instead of another 401k. The process is simple and an IRA will give you a chance to pick fund you wouldn’t otherwise see.

You may want to consider the benefits of both the Roth and the traditional IRA. To spread your tax liability, choose the Roth IRA which grows with after tax dollars. Many people like to have a 401k and a Roth IRA. The law allows this. You can read dozens of opinions about the pluses and minuses of a Roth IRA in comparison to a regular IRA. I like to use them both to minimize the tax concerns in retirement. The average American retiree underestimates the amount of taxes due after age 65. Sure, you enter the lowest tax bracket but you still owe Uncle Sam.

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