One of the most popular pension plans in the U.S is the 401k retirement scheme which also features the 401k rollover options. The 401k allows employees to make contributions from their wages to a retirement fund which can then be cashed in when they retire. The advantage of this plan is that employers can also pay money in to this fund and the savings are free from tax. What happens if you choose to move jobs? This is the time that the 401k rollover options can be implemented.

If you change jobs there are several options relating to the 401k rollover facility. A direct IRA Rollover means that the contributions held in your retirement account can be transferred into an Individual Retirement Account. The money does not come into your hand as your old employer will wire it straight into your personal account. This method has benefits by way of no penalties and the taxes are not withheld.

If you have stocks in your last employer's company your contributions can be handled one of two ways. The first is that you can transfer the stocks directly into your Individual Retirement Account without the stocks being liquidated. The second option is that you sell the stocks and pay the rollover into your account within a 60 day period. If you fail to place the cash in the account within the 60 days then you will have to pay tax on it.

It is also possible to leave your 401k with your existing employer or transfer it to your new employer. The second option will mean that you will have to check what investment options your new employer is offering. It can be a difficult process too unless you have already arranged the rollover before changing jobs.

Finally, you could end your plan and cash in the funds from your 401k. This may result in you receiving less than you might think. Early withdrawal can mean that you have to pay income tax and an early withdrawal fee of as much as 10%. Employers are also obliged to hold 20% of the funds for tax reasons.

There are many more freelancers and self employed workers than there were in previous years, Many do not think that they are eligible for a pension plan but 401k does have a plan that it suitable for these occupations.

The 401k(Solo) is one of the self employed retirement plans available and it has many advantages. You can pay in as much as 100% on the first $15,500 that you earn in a year. You can then add or deduct contributions over this first amount by up to 25%. Should you find yourself reaching the cap amount of $225,000 per annum, then it is worthwhile looking at other self employed retirement plans. Another option with this plan is that you can choose not to pay anything if you are having a tough year. It is possible to borrow money from the retirement fund without being penalised.

Changing your job is a daunting task but make sure that you check out all of the 401k rollover options and decide which is the correct one for you. If you are unsure you can approach the professionals to help you make your choice.


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