Unlock Your Old 401(k)'s Potential – A Guide to Smart Rollovers
THE QUICK & DIRTY
Don't leave your retirement savings in the hands of your former employer. An IRA rollover offers more investment choices, lower fees, and easier management. Learn how to take control and give your retirement a serious upgrade.
KEY TAKEAWAYS
Rolling over your old 401(k) to a personal IRA gives you more investment options, lower fees, and easier management.
IRAs offer greater flexibility and control compared to employer-sponsored 401(k) plans.
Take control of your retirement savings by consolidating old 401(k)s into a single, easy-to-manage IRA.
You landed an amazing new job — congrats! But wait... what about that old 401(k) from your last job? Ignoring it isn't an option (seriously, don't even think about it).
Why You Can't Just Ignore Your Old 401(k)
Your old 401(k) might not be serving you as well as it could. Here are a few 401(k) limitations:
Limited Investment Choices
A study by the Investment Company Institute found that the average 401(k) plan offers just 25 investment options, while IRAs typically offer hundreds or even thousands. More choices mean more opportunities to find investments that fit your needs.
Higher-Than-Necessary Fees
According to a report by Morningstar, the average 401(k) plan has an expense ratio of 0.45%, while the average IRA has an expense ratio of 0.10%. That seemingly small difference in fees could cost you thousands of dollars over the lifetime of your investments.
Administrative Headaches
Let's face it, dealing with old 401(k)s can be a pain.
But don't worry, you have options – three, in fact. You can leave it where it is, roll it into your new employer's plan, or… give it a serious upgrade with a personal IRA rollover.
Why a Personal IRA is the Best Choice
While you could leave your old 401(k) where it is or roll it into your new employer's plan, a personal IRA offers the ultimate upgrade for 30-something high earners.
Here's why:
You can invest in (almost) anything: Stocks, bonds, mutual funds, ETFs – oh my! An IRA gives you the freedom to build a diversified portfolio that truly aligns with your goals and risk tolerance. No more settling for the limited options in your employer's plan.
The fees are much lower: IRAs often have lower fees than 401(k)s, which means more money stays invested and working hard for you.
Consolidation is much easier: If you hop jobs a few times, you can roll all your old plans into one IRA in your name, making all your retirement investments much easier to manage.
Steps to Roll Your Old 401(k) Into an IRA
Ready to ditch your old 401(k) and embrace the IRA life? Here's your step-by-step guide:
Choose Your IRA: Traditional or Roth? This decision will be driven by whether your 401(k) contributions were pre-tax, post-tax, or both.
Open Your Account: Find a reputable provider/financial institution. We like Vanguard. Make sure you have an active account number before you do the next step.
Contact Your Old Plan Provider: The number should be on the statement. We agree, dealing with customer service can be like pulling teeth. But it’s worth it.
Initiate the Transfer: They'll guide you through the process, which usually involves completing some paperwork.
Hang tight: Typically it’ll take 7-10 business days to receive a check.
Send the check to your new account: Snail mail is the worst, we know. But get it out of your hands as soon as possible so you don’t face any early withdrawal penalties.
Rolling over your old 401(k) to an IRA is a smart move for high earners who want more control, flexibility, and investment options. So don't let your old 401(k) gather dust. Take control of your retirement savings — and watch your money grow faster with lower fees and smarter investment choices. It's like trading in your old clunker for a sleek sports car — you'll have the freedom to go wherever you want, whenever you want. So what are you waiting for? Ditch the clunker and take your retirement savings for a joyride. It's time to upgrade your retirement. It's time for an IRA.
Stash Wealth offers financial planning services for 30-somethings who earn six figures.
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Written by Priya Malani
Founder & CEO
Priya is an industry thought leader and personal finance expert for HENRYs [High Earners, Not Rich Yet]. Her relatable, no-bullshit style has garnered attention from the largest media outlets in the country including Forbes, The Wall Street Journal, Business Insider, NerdWallet, and more.
