Tax Benefits of Rolling Your 401(k) Into an IRA

Your company’s 401(k) retirement plan is a great investment choice. However, there are many good reasons to consider rolling your 401(k)-retirement plan into an IRA. The process is simple, and you may find some tax benefits for making the switch. Understanding your options and the possible tax implications can help you make a well-informed decision.

Less Confusing Rules

One issue with a 401(k) plan is there is little to no standardization, meaning your 401(k) has the potential to work in a way completely different from the way your friend’s, who is employed at another business, 401(k) works. Even if you have a great understanding of investing and financing, truly understanding your 401(k) would necessitate reading a hefty amount of legal fine print. In comparison, IRAs are mainly standardized and patterned, so they are fairly easier to understand.

Rather than your company establishing the rules, the Internal Revenue Service, otherwise known as the IRS, makes the rules of your IRA. While the IRS isn’t known for making people’s lives easier, it turns out learning and comprehending the rules and regulations of an IRA is far easier than doing so with a 401(k).

Estate Planning Choices

When you die, it is likely your 401(k) will be settled and paid accordingly in one mass amount to your successor. But, when this happens, your beneficiary will be facing a huge tax bill when the next tax season arrives. If you have an IRA, you might be able to select other distribution opportunities over time or for your successor to roll your IRA into his or her own when the time comes.

Increased Investment Options

While there are thousands of options accessible to you as an investor, a 401(k) is restricted to only a small portion of investment options, which are typically mutual funds. In addition, the majority of 401(k) plans don’t permit the use of risk management choices. The options accessible to you with a 401(k) usually rely on the plan administrator. Even though these options might be decent, having more investment opportunities to pick from can help you find the best investment available.

With an IRA, far more investment options will become available to you, such as risk management choices, individual stocks, and exchange-traded funds. More options to choose from can also assist you in establishing a superior retirement savings plan.

Added Control

As you might already know, your company sets up the 401(k) plans, and there are countless determinants that result in a good or bad plan. Issues can include money handling, fees, and charges for services. When you roll a 401(k) into an IRA, you have more authority over these determinants. Because your business only meets contributions from your existing salary, transferring money from a former job won’t effect the amount your business is obligated to match.

Retirement. Your vision. Our passion.

At Macino Financial Services we assist our clients with this rollover or Roth conversion process from the very beginning until the end and it’s sure to make your retirement relaxing. Give us a call at 419.491.0909 to schedule your complimentary review.

Macino Financial
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