401K Rollover to IRA

It is a truly a great feeling to have worked long and hard and finally reached retirement. Many people save and plan for their retirement by using a 401K account usually managed by the company that employs them. At the time of retirement, or if you are switching companies, you have a few directions to choose from with regards to your 401K plan.
Some choose to leave their 401K plan active with the company they worked for while some choose to cash out or withdraw their funds to invest in other ways. Many people choose to do a 401K rollover to IRA to maintain their retirement fund, and there are several financial benefits that result from taking this course. I’d like to discuss a few of them along with the convenience it can provide for you.
Don’t Cash Out
Many people feel that cashing out is the best move because of the immediate benefits of some extra cash. Some use it to pay off their home or to purchase a new one. But there are a few financial penalties for doing this. If you withdraw your fund before retirement age, you must pay a 10% penalty on top of the taxes that are taken from the account. So a $100,000 fund would quickly become a $70,000 fund. Instead of re-investing your fund or buying a home it would be more beneficial to do a 401K rollover to IRA which would allow your fund to earn interest on the dollars not being taxed. If you rollover your 401K to an IRA account, you will keep the $21,000 that would have gone to taxes and penalties and you will earn interest on it the whole time you leave it in the IRA. So obviously it is financially more beneficial to do a 401K rollover to IRA instead of cashing out when you retire or change companies. But Why not just leave the funds in the 401K with your previous company?
Don’t Keep The 401K
One reason it is better to rollover to an IRA is to avoid complicating your investment portfolio. Think of this. You usually don’t plan on swithcing companies in the future, because you need stability and you like the idea of seniority. But it happens to most people anyway. So if you change companies 3 times in your 40 + years in the work force, you would have 4 seperate 401K plans. With 4 portfolio statements coming periodically, it would be a nightmare to maintain. And likely you would be discouraged by the mounting paper trail and stop paying close enough attentionto your portfolio. So to avoid this complication, consolidate your 401K pland in an IRA fund and you will be able to keep it together.
Upon retirement, you may consider keeping your 401K with the previous employer, but I still strongly reccomend you consolidate into an IRA because it is usually cheaper. Plus most companies only match your contributions for a certain time period and then cap out. By the time you are retiring, you are probably past that point and would yield greater return from the IRA than the 401K.
Find a Good Company
So perform a 401K rollover to IRA and reap the full rewards of your hard work. Remember to research the financial company well before you invest with them. It is important to have a good agent that can answer your questions and guide you in your portfolio development, and There are several places online to check out some institutions and see who is right for you.