How do you transfer a 401(k) into an IRA?


Quick Answer

As long as a person is separated from his job, moving the money in a 401(k) plan into an individual retirement account requires little more than choosing the proper fund for the individual's needs, according to Good Financial Cents. Investors opting to rollover a 401(k) plan into a traditional or Roth IRA can take a distribution or leave the account where it is, depending on their needs and retirement goals.

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Full Answer

Rollover IRAs allow investors to consolidate retirement investments from multiple 401(k) and 403(b) plans left at previous employers while still maintaining the tax-deferred status of retirement investments, explains Good Financial Cents. Moving funds from a 401(k) to an IRA usually provides an investor with many of the same or similar investment choices he had with his 401(k) plan, including mutual funds, stocks, bonds, money markets and CDs. Investment firms can help individuals determine which plan is best for them and arrange for the transfer of existing 401(k) accounts into a consolidated IRA, states Merrill Edge.

All of the tax advantages and withdrawal exemptions of a 401(k) plan also exist under an IRA, notes Fidelity Investments. For example, IRAs provide the same potential tax-deferred growth of savings and allow account holders to make penalty-free withdrawals under certain circumstances, including a first-time home purchase and some college or medical expenses.

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