Consolidate Your 401k's Into An IRA
Most people wind up switching companies several times in the course of their lives. Hardly ever does a person stay with 1 employer their entire working life. Many companies offer a 401k plan as part of their benefits package. This leaves many people with multiple 401k funds in their name in their career course.
What should you do with your 401k fund after switching companies? You might look into a 401k rollover to IRA.
Rolling your 401k fund into an IRA can be beneficial in multiple ways. I'll briefly discuss a few of them.
To begin, if a person changes companies 3 times, they will own 4 401k policies (3 from the previous employers and 1 from the new one). Having multiple accounts can be difficult to manage. You would have to follow paper on all 4 accounts instead of just 1. And most people will get discouraged by the excess paperwork and stop taking the needed interest in their portfolio. This can create huge problems down the road.
By rolling your 401k into an IRA fund after each job change, you can consolidate that paperwork and make your retirement much easier to manage. And you can continue to add your 401k plans to a single IRA as often as necessary. That same person that changed jobs 3 times in their career would have now only 1 401k and 1 IRA. That would be worlds easier to handle.
Also, consolidating your accounts into an IRA reduces your risk factor. If you leave the 3 previous 401k plans with the previous companies you run the risk of the companies going under. That would in turn leave your 401k worthless. There is still a small risk when you invest in an IRA with a financial institution, but the risk is much smaller than the alternative.
This will also allow you to take control of your planning and that is the creates reward. You don't want to depend on others to take care of your retirement because they can't possibly care as much about it as you do.
But the 401K is still a great investment as it offers 100% return of investment. You don't find a deal like that every day. Contribute as much as your company will match and put any extra funds toward your IRA.
What should you do with your 401k fund after switching companies? You might look into a 401k rollover to IRA.
Rolling your 401k fund into an IRA can be beneficial in multiple ways. I'll briefly discuss a few of them.
To begin, if a person changes companies 3 times, they will own 4 401k policies (3 from the previous employers and 1 from the new one). Having multiple accounts can be difficult to manage. You would have to follow paper on all 4 accounts instead of just 1. And most people will get discouraged by the excess paperwork and stop taking the needed interest in their portfolio. This can create huge problems down the road.
By rolling your 401k into an IRA fund after each job change, you can consolidate that paperwork and make your retirement much easier to manage. And you can continue to add your 401k plans to a single IRA as often as necessary. That same person that changed jobs 3 times in their career would have now only 1 401k and 1 IRA. That would be worlds easier to handle.
Also, consolidating your accounts into an IRA reduces your risk factor. If you leave the 3 previous 401k plans with the previous companies you run the risk of the companies going under. That would in turn leave your 401k worthless. There is still a small risk when you invest in an IRA with a financial institution, but the risk is much smaller than the alternative.
This will also allow you to take control of your planning and that is the creates reward. You don't want to depend on others to take care of your retirement because they can't possibly care as much about it as you do.
But the 401K is still a great investment as it offers 100% return of investment. You don't find a deal like that every day. Contribute as much as your company will match and put any extra funds toward your IRA.
posted by Credit Counseling at
1:31 PM
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