What is a 401k Rollover and How Does It Work?

When you hear the term 401K rollover it is referring to one of two situations

  1. The process of rolling over your prior employer’s 401K to your current employer’s 401K.
  2. The process of rolling over your prior employer’s 401K to an IRA Rollover.

Which is better? From a tax standpoint, if they are done properly, it makes no difference. Our feeling is that it is almost always a better decision to rollover your old 401K account to a Rollover IRA. When rolling your 401K to an IRA Rollover, you continue to benefit from the tax deferred status you enjoyed with your 401K account and it provides for a lot more flexibility from an investment perspective than if you rolled your funds into your current employer’s 401K. You can design the appropriate asset allocation for your Rollover IRA in an open architecture environment using the best performing, least expensive mutual funds. If you rollover your 401K account into your current employer’s 401K, you are limited to the investment choices your employer offers. In some cases, the funds offered through 401K plans carry significantly higher fees that go toward compensating all the various parties it takes to manage and administer the 401K plan.

401k Rollover Frequently Asked Questions

Here are some answer to your frequently asked questions regarding 401k rollovers.

401k Rollover Section Menu:

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