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How to Roll Over Your Current Company’s 401K into an IRA

As you move from one job to another, you might find yourself faced with the decision of what to do with your 401K from your current company. One option is to roll it over into an Individual retirement account (IRA). This can be a smart move for a number of reasons, including more investment options, lower fees, and greater control over your retirement savings. If you’re considering this option, here are the steps to take to roll over your 401K into an IRA.

1. Choose the Right Type of IRA
First, you’ll need to decide whether to roll over your 401K into a traditional IRA or a Roth IRA. In a traditional IRA, your contributions are tax-deductible, but you pay taxes when you withdraw the money in retirement. In a Roth IRA, you contribute after-tax dollars, but your withdrawals in retirement are tax-free. Consider your current tax situation and your future plans to determine which type of IRA is best for you.

2. Open an IRA Account
Next, you’ll need to open an IRA account with a financial institution. You can choose to open the account with a bank, a brokerage firm, or a robo-advisor, depending on your investment preferences. Make sure to research the fees, investment options, and customer service quality of the institution before opening the account.

3. Initiate the Rollover
Contact your current employer’s plan administrator to begin the rollover process. They will provide you with the necessary paperwork to complete the transfer of your 401K assets into the new IRA account. You can typically choose to do a direct rollover, where the funds are transferred directly from your 401K into the IRA, or an indirect rollover, where you receive a check from your 401K and have 60 days to deposit it into the IRA to avoid taxes and penalties.

4. Choose Your Investments
Once the funds are in your new IRA account, it’s time to decide how to invest them. Depending on the financial institution you chose, you may have access to a wide range of investment options including mutual funds, exchange-traded funds (ETFs), stocks, and bonds. Consider your risk tolerance, investment goals, and time horizon when choosing your investments.

5. Monitor and Manage Your IRA
After the rollover is complete and your funds are invested in your new IRA, it’s important to regularly monitor and manage your account. Keep an eye on your investment performance, rebalance your portfolio as needed, and adjust your investment strategy as your financial situation and retirement goals evolve.

Rolling over your current company’s 401K into an IRA can offer you greater flexibility and control over your retirement savings. By following these steps and carefully considering your options, you can make the most of your retirement assets and set yourself up for a secure future.