5 Reasons to Roll Over Your 401(k) When You Change Jobs

Thinking about rolling over an old 401(k) or other workplace retirement savings plan that’s collecting dust? When leaving a job, leaving behind a 401(k) is easy to do. After all, when it comes to retirement savings, out of sight usually means out of mind.

Consider this – today’s average worker will change jobs 10-15 times during the course of their career, according to the most recent data from the Bureau of Labor Statistics. Though staggering, it’s no surprise that having one or more retirement accounts scattered with former employers can be inconvenient. Plus, it’s not a good idea to leave your money with a company for which you’re no longer working. Still, there are other reasons to roll over your 401k(k) to a self-directed IRA:

Cashing out is bad.

The immediate cost of cashing out and keeping your 401(k) funds is significant. You’ll lose a hefty amount in federal taxes and penalties – possibly as much as 50%! In addition, you will lose out on the tax-deferred compounding, or tax-exempt compounding if from a Roth 401(k). This means you’ll miss out on the future tax-advantaged growth and earnings of your withdrawn retirement funds.

Lower fees.

Most 401(k) plans pass on the plan’s administration and investment fees to their participants, and given the average range of .05-1.00% annually, these fees can wreak serious havoc on your retirement nest egg.

401(k) changes.

The fees, investment choices and trustees of your 401(k) plan can change at any time.  If you’re no longer employed there, you might not get the latest news and announcements as quickly as you would want – and if you’re not paying close attention to your 401(k) statements, you may not realize the changes until they’ve already taken place.

More control and investment options.

Most 401(k) plans have restrictions on what you can invest in – and participants usually have a very limited selection of mutual funds, and sometimes the employer’s stock. Rolling your old 401(k)s to a self-directed IRA gives you a much wider range of investment options, often called alternative assets, that include real estate, private placements and Reg D investments, private LPs and LLCs, private stock, private debt, crowdfunding investments, precious metals and structured settlements. With a STRATA self-directed IRA you can even choose to include public investments in addition to nontraditional assets in your retirement portfolio, giving you greater diversity and control over your future.

Easier tracking.

When you leave a job or change careers, it’s easier to track and maintain your retirement savings when it’s centralized in one place. Consolidating your accounts will save you time and money. Once combined, you can direct your own investments or work with your financial adviser to invest your money to meet your retirement goals.

Rolling over your old 401(k) plans into a self-directed IRA is a painless move that can offer long-term advantages. Simply open a self-directed IRA with STRATA and complete our Deposit Certification form (to certify the rollover). Then contact your 401(k) plan administrator to request the proper form. The time for completing your rollover depends on how quickly your plan administrator can process your request.  Generally, we see rollovers take from 3-15 days to complete. It’s easier than you think!

strata-favicon Have an old 401(k) or other workplace retirement plan to rollover? Get a head start by downloading our whitepaper, Rolling Over Retirement Savings.