We’ve all left a job at some point during our career. According to a January 2018 report from the Bureau of Labor Statistics, the average person changes jobs 10 to 15 times (with an average of 12 job changes) during his or her career. Chances are, most people get several statements every month from their former employers’ 401(k) plans. So what should you do with the money you have saved with these plans?

The short answer is: Roll over your old 401(k. There are advantages to taking the rollover route, and these advantages all have to do with the control you have over the money you worked hard to save.

Here are six reasons why you should roll over your 401(k).

1. Plan Communication

Leaving your account with your old employer means it will be difficult to get communications about the plan, especially if news is distributed through company email. Getting in touch with your plan administrator may also be hard when you aren’t part of the company anymore. If something happens and your former company restructures or closes, your plan may be in limbo. Having access to your plan is an important part of any long-term saving strategy and leaving your money somewhere else means you have less control.

It’s also important to mention that many 401(k) plan rules state that if you have less than $1,000 in your account, it can automatically cashed out and distributed to you. Many also allow amounts under $5,000 to be placed in an IRA.

2. Avoiding Plan Fees and Costs

Rolling over into an IRA could save you a lot in management and administrative fees that diminish returns over time. There also may be an annual fee charged by the plan administrator.

However, in the interest of full disclosure, sometimes bigger 401(k) plans that have larger amounts to invest may have access funds that charge lower fees. Even though your IRA won’t be free of fees either, you will have more choices and more control over how and where you invest, as well as the fess associated with them.

3. Rules and Taxes

Each company can set up their plan differently and those rules can vary greatly. However, IRA rules are set by the Internal Revenue Service. Every broker must follow these same rules. 

A 401(k) and an IRA have different regulations regarding taxes on distributions. Twenty percent of distributions from a 401(k) are withheld for federal taxes, while IRAs allow you to elect if you want taxes withheld. While this option is available to you for IRA distributions, it’s probably wise to have some tax withheld rather than having a possible large tax bill at the end of the year with possible interest and penalties charged for underpayment. But choosing how much to have withheld to more accurately reflect the actual amount you owe, rather than an automatic 20%, means you have more control over how you manage your individual tax situation.

4. Roth IRA Options

Rolling over your 401(k) means you can choose a Roth IRA that offers advantages. These IRAs allow you to pay taxes on your money when it is contributed. Doing this means there is no tax due upon withdrawal. This is not the case with traditional IRAs. If you expect to be in a higher tax bracket upon retirement, paying the taxes now is in your best interest. 

There are also other rules regarding the required minimum distributions when dealing with Roth accounts that are advantageous. Additionally, Roth IRAs do not have early-withdrawal penalties (under age 59½) on contributions – though there are penalties for withdrawing earnings. Please note some plan administrators will only roll funds into traditional IRAs. If that’s the case, you can do that and then convert the plan to a Roth.

5. Investment Choices 

401(k)s are generally limited in terms of what you can invest in, usually giving you the choice of a few mutual bond funds. However, when you roll over your money into an IRA, you can also choose stocks or bonds of exchange-traded funds as well. More choices means you have better control over your investments. IRAs also allow you to buy and sell your holdings when you choose to do so, while most 401(k) plans only allow you to make changes a few times a year.

6. IRAs Have Estate Planning Advantages 

Upon your death, 401(k)s are paid in a lump sum to your beneficiary, which could cause income and inheritance tax difficulties. Most companies prefer this, so they don’t have to maintain the account of an employee who is no longer there. While inheriting IRAs has regulations, they offer more payout options, giving your beneficiary better control.

Now more than ever, it’s important to have access and control of your retirement savings. The good news is, it doesn’t have to be difficult. At Blue Waters Financial Group, we help clients roll over their 401(k) plans and take charge of their money by using insurance products such as fixed or fixed indexed annuities that protect retirement funds from stock market volatility. We position you for potential gains using various market indexes and offer options to provide a strong lifetime income when you retire.

Want to know more? Schedule a time to discuss your rollover options with us today. To schedule your no-obligation meeting, go to our contact page or call us today at 704-790-2583 (BLUE).