One of the first items on your post-job-loss-agenda should be determining the state of your finances. First, this is an appropriate time to analyze the money that you have at hand and how much you need to fund your basic needs for the projected time-frame. Secondly, this is also the best time to determine how to handle money in your 401K. If you already have a financial planner you may want to talk to him or her about your 401K and determine which way to go. Depending on the returns and other factors in your existing plan, they might recommend that you leave your 401K in the same plan. On the other hand, complete pullout from your plan might be required by the plan. In that case, it will be necessary to rollover your 401K to an individual IRA.
What is an IRA?
An IRA which stands for an Individual Retirement Account, provides either a tax-deferred or tax-free way of saving for retirement. There are many different types of IRA accounts from which to choose from, depending on the financial goals and situations of each individual, though traditional and Roth IRAs are the most common choices.
Determine if your 401K carries any restrictions
Call your existing financial institution to determine if they have any restrictions on transferring from your plan after you have been terminated. Some plans have certain guidelines which might restrict you from transferring your money for a set duration of time. It will be nice to find out how much time you have before you embark on a quest for a brokerage firm.
Choosing a bank, brokerage firm or mutual fund company to rollover your 401K into
I am a big fan of recommendations and especially when it comes to matters concerning my finances. Call some of your friends or family members who have had to rollover their 401K in the past and get recommendations on which financial institutions they are currently using. This is by far the best way to get the most sincere unbiased opinion. Some of the questions you should ask about the financial institution might be,
- What fees are involved?
- How is the service? (Especially after you have rolled over)
- Which other companies did you look at?
If you do not have any friends or family who can give you insightful information on this topic, then I recommend that you visit some reputable websites and read reviews and recommendations. Some of my personal favorites include,
– Fool.com – Personal Finance
– Mint.com- Financial blogs
-Yahoo Finance – News, financials articles, calculators and guides
Moving your funds
Once you have selected which brokerage firm to go with, you are now ready to transfer funds in your 401K plan to to the new IRA at the selected brokerage firm. Depending on the companies involved, there might be some paperwork involved before the money can be fully transferred. Follow along in the process until the money has been transferred into your new account. Now you can relax before you start looking for a new job.
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