Rolling Over Your 401(k) to an IRA


Filed under: Retirement


At some point during your career, you might find yourself deciding what to do with an “old” 401(k). This typically refers to a 401(k) fund to which you can no longer contribute (such as in the case of changing employers or being laid off by an employer). The money is still yours, of course, but you might find that it suits you to move it somewhere else.

If you’ve decided upon an Individual Retirement Account (IRA), you will immediately be confronted with another big choice: Should you choose a Traditional account, or a Roth IRA?

With a Traditional IRA, the tax structure will be similar to what you’ve probably been doing. You will make contributions on a pre-tax basis, lowering your overall tax liability for the year, and you won’t owe income taxes on your retirement funds until you begin taking withdrawals in retirement. Many people find this to be the best way to structure both their current and expected retirement incomes.

On the other hand, you might elect to open a Roth IRA. Now you will make contributions on an after-tax basis, so they won’t help you with regard to your current income tax liability. But you will enjoy non-taxable income on the distributions you take in retirement. This can be a good option for those who expect to face a higher income tax burden in retirement, than they do currently. However, 401(k) assets that you roll into a Roth IRA will be subject to taxes at the time of the rollover.

Both Traditional and Roth IRAs can offer significant benefits, such as a wider range of investment options and tools than offered by many 401(k) plans. And since you can roll over several old accounts into an IRA, you will likely enjoy having all of your money in one place, where it is easier to manage.

There is one downside to conducting rollovers, however: If you don’t follow guidelines and procedures precisely, you can trigger significant and unfortunate tax penalties. Give us a call before proceeding with a rollover, and we will help you understand the pros and cons of each option in more detail.


If you would like more information or have specific questions, please contact us using the following form. We would be happy to assist you.

This information has been provided by a licensed insurance professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting the insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax, trust and estate, or investment advice. Infinite Wealth Advisors is not an investment advisory firm.  Investment Advisory Services provided by NAMCOA® – Naples Asset Management Company®, LLC, a federally registered investment advisor, website: www.NAMCOA.com .