Finance Roll

When we start out work for the first time, we believe that we would stay with the same company until retirement and have a comfortable retirement life with all the money we have saved in our 401k account. Unfortunately this does not happen. In present day and time, we end up changing jobs several times before we reach retirement and this poses a lot of questions about what we should do with our 401k benefits.

When changing a job, you have a few choices with regard to your 401k account. You can either keep the 401k with your old employer, if they allow it, you can rollover your 401k account to your new employer, or you can rollover your 401k benefits to a self-directed IRA.

Keeping your 401k with your old employer will have no benefit for you or your employer, and most employers prefer that they ex-employees transfer the money. So, the next best option for you is to rollover the 401k benefits to your new employer.

Most 401k plans have just 15 mutual fund choices and you will benefit from rolling over your 401k to your new employer if your plan has a loan provision where it will be easy for you to borrow money.

You can also rollover over your 401k to a self-directed IRA and this is of two types -- contributory and rollover IRA. In a contributory self-directed IRA, you can contribute annually but you can no longer roll back the 401k part to another new employer's 401k. However, a rollover IRA is more flexible. A rollover IRA allows you roll back the proceeds to a 401k plan so that you can take advantage of the loan provision in the 401k plan. However, you should not make annual contributions to this IRA because of tax reasons. A rollover IRA is set up through a brokerage firm which means you will have access to the entire gamut of mutual funds that the firm has to offer.