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What is a 401(k) Rollover and Should I Do It?


When you leave your employer, you have several options for what to do with the money in your 401(k) plan. One option is to roll the money over into an individual retirement account (IRA) or a new employer's 401(k) plan. This is called a rollover. By rolling over the funds, you can maintain the tax-deferred status of the money and avoid any immediate taxes or penalties. Another option is to cash out the plan, but this is generally not recommended as it may trigger taxes and penalties. It is important to consult with a financial advisor or tax professional before making a decision on how to handle your 401(k) funds when leaving your employer.

Whether or not you should roll over your 401(k) when you leave a job depends on your individual financial situation and goals.

Here are some factors to consider when deciding whether to roll over your 401(k):

  • Investment options: Your new employer's 401(k) plan may have a different set of investment options than your old plan. If you are unhappy with the investment options in your new plan, you may want to consider rolling over your old plan to an IRA, which typically has more investment options.

  • Fees: Compare the fees for your old and new plans. If your new plan has higher fees, you may want to consider rolling over your old plan to an IRA.

  • Preservation of tax-deferred status: By rolling over your 401(k) to an IRA or a new employer's 401(k) plan, you can maintain the tax-deferred status of your savings and avoid taxes and penalties.

  • Your age: If you are over 59 1/2 and you need the money for something else, you can withdraw it without penalty.

It's always a good idea to consult with a financial advisor or tax professional before making a decision on how to handle your 401(k) funds when leaving your employer to determine what's best for you. It's important to weigh the pros and cons of your options and make the best decision for your financial goals and situation.

If you have any questions or to speak with one of our advisors, email us at info@copawealthstartegies.com or call us at (503) 217-4150.

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