401k Rollover Options

When it comes to rolling over your 401k into another retirement plan, you should find out all the 401k rollover options you have available to you. Below are some of the most common 401k rollover options for anyone thinking of rolling over a 401k into a different retirement plan.

401k Rollover Option 1: 401k rollover into a traditional IRA

The first 401k rollover option is to rollover the 401k assets into a traditional IRA. This is the most common of all 401k rollover options and is the simplest option. Your 401k assets retain the tax deferral benefits and the rollover is tax free. If you don't have any particular preference of where to rollover your 401k to, this is the option that most people choose.

401k Rollover Option 2: 401k rollover into a Roth IRA

Another popular 401k rollover option is to rollover 401k assets into a Roth IRA. The drawback is that if you make too much money, you will not be eligible to open a Roth IRA or if you can open a Roth IRA now and later on make more money, then you will not be able to contribute to a Roth IRA later. However, a 401k rollover to a Roth IRA is preferable for most people who are eligible. If you have not paid taxes on your 401k contributions though, you will have to pay taxes when you rollover a 401k to a Roth IRA. But your investments accumulate tax free and withdrawals are tax free.

401k Rollover Option 3: Do not rollover 401k

Another 401k rollover option that most people don't like or think of is to not rollover the 401k at all. You can leave your 401k where it is most of the time. However, most people want more control of their 401k and when they leave a job, they do not want anything left behind. However, if you don't have a solid plan of what to do with your 401k, it is a good idea to leave it where it is until you have figured out what to do. You have to, however, contact your plan administrator to express your intention to leave it where it is and possibly ask them for your options to avoid them just cutting a check to you for the balance of your 401k. For a comparison of a Traditional IRA vs. a Employer Qualified Retirement Plan, see Should I rollover my 401k into an IRA.

401k Rollover Option 4: Rollover the 401k into a 529 plan, annuities, etc.

Apart from the obvious choices of what to do with your 401k, you can also rollover your 401k into other types of plans such as a 529 plan, a 403b plan, an annuity or even a life insurance plan. Read the fine print to make sure that the plans are compatible.