What to Consider Before Rolling Over Your 401(k)

Before rolling your 401(k) into an IRA, consider a few important factors.

Consumer Reports points out a handful of considerations to make before rolling over an old 401(k).

First, you should consider the fees versus the flexibility and return.

They report on a2011 studythat found IRA account holders pay more in fees than 401(k) participants.

That may be true, but theres often more flexibility with an IRA, too.

Aside from that, a couple of other possible factors:

Whats the cost of rolling over?

With a direct rollover from your 401(k) to an IRA, there are no tax consequences.

Ask your adviser about the cost of that transaction.

Where can I save more on taxes?

Withdrawals from 401(k)s and IRAs are taxed the same.

You must begin required minimum distributions from both by April 1 of the year after you turn 7012.

Rolling over that sum into an IRA subjects all of it to the ordinary income tax rate at withdrawal.

Its a great tax-planning opportunity, Love says.

Of course, you should also know the different rules between a 401(k) and an IRA.

Rolling over to an IRA?

Ask these five questions first| Consumer Reports

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