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The Advantages Of A 401k Rollover For Retirement Planning

Unfortunately, the economic woes of the past few years have made many wonder if retirement will be a reality at all. While the economic forecast has been bad news for some, the good news is that you ...

Unfortunately, the economic woes of the past few years have made many wonder if retirement will be a reality at all. While the economic forecast has been bad news for some, the good news is that you still can retire with the right amount of planning. You simply must take advantage of the tools at your disposal. Among these tools the 401k rollover is perhaps the most underutilized. When should you use a rollover? Most often, people roll over monies when they switch jobs or decide to place the money they've accrued from a 401k account into a private IRA. It is an option to hold on to your retirement savings until you actually need it. The advantages of a 401k rollover are many, whether you're still active in the workforce or you're nearing retirement.

Firstly, a 401k rollover means that you don't have to pay taxes or penalties on your money before it's time. A mistake that many people make when they leave or lose a job is thinking they need the money right now. It can be tempting when you're not sure where your next paycheck is coming from to cash out, but the extra taxes and penalties that you pay as a result can take a hefty chunk out of your hard earned savings way before it's really necessary.

Secondly, a 401k rollover gives you options. Either roll over the previous account into a new 401k at another employer, or use a privately managed IRA. The advantage of rolling over into another 401k is that you can continue to take advantage of matching plans that may be offered from the new employer. The advantage of rolling over to an IRA is that you have more control over your investment regardless of where you work. It is also tax free until you retire and decide to pull the money out.

Thirdly, a 401k rollover gives your money time to grow. Greater rates of return are common for 401k plans than a typical government sponsored social security. A well balanced 401k ranks exponentially higher than full social security payments because it makes use of bonds, mutual funds, and high performance stocks to garner anywhere from 5-10% returns per year. Compound that over the course of a work lifetimeBusiness Management Articles, and the retirement planning that you do on your own can mean a lot more than what is waiting on you when you hit retirement age.

A 401k is vital to retirement planning if you don't want to scrape by. Rollovers allow you to hold on to more of your money and see a greater return on your overall investment.

Article Tags: 401k Rollover, Retirement Planning

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Looking for a 401k Rollover plan that is right for you? For answers to this and other Retirement Planning questions, visit our site!



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