There are several different things you can do with your 401(k) when you leave your job. However, for many people, the best choice is to roll your 401(k) into an IRA. Starting the rollover process is fairly simple. Choose a financial institution with the best rollover IRA account benefits and management and make a tax-free direct transfer from your old 401(k) account into your new IRA account. The hardest part of the process is deciding which financial institution has the best rollover IRA for you.
What Is a Rollover IRA?
The process of withdrawing cash or assets from one eligible retirement plan, and contributing that money or assets into another eligible retirement plan, is called a rollover. An example would be transferring cash from your employer-sponsored 401(k) to an individually owned IRA that you’ve set up outside of work. When you’re rolling your cash or assets from one retirement account to another, you can maintain the tax-deferred status of your cash or assets. However, you can only maintain the tax-deferred status if you complete the transaction within 60 days.
Rolling your different retirement plans into one account, especially one that you own and control, can provide easier management and increased investment flexibility.
Advantages of a Rollover IRA
For some people, leaving their money in a 401(k) might have benefits, like being better protected from creditors or having the ability to take out a 401(k) loan. However, for some people, rolling their employer-sponsored 401(k) into an IRA is the best choice for their retirement money. There are a lot of perks that come with an IRA, some of which include:
A wider investment selection than your typical 401(k) plan.
Cheaper investments, depending on your employer’s investment offerings.
Lower account fees (or no account fees) compared to higher 401(k) plan fees.
How to Choose Your Rollover IRA Provider
Before you begin, you’ll want to determine your personal investment style. If you have a do-it-yourself personality, you might prefer to manage your IRA by yourself. If you prefer a hands-off approach, then you would probably want an account manager to handle your IRA for you.
Once you’ve decided on your investment style, the next step is to look at different banks and brokerage firms and determine which one has the best rollover IRA account for you. You may want to look into online brokerages, robo-advisors, and traditional providers. Whichever one you choose, the criteria to find the best rollover IRA is the same:
Investment availability.
Research access.
Trading fees.
Account fees.
Top Picks for Online Brokers
If you’re more of a hands-on investor and you want to build and manage your own investment portfolio, then you may want to look for an online broker. Most online brokers allow you to freely pick and choose from a variety of low-cost investments. Here are some of the best online brokers.
Merrill Edge has no account minimum, no stock trading costs, and no base commission on options trades.
Their account fees include no annual fee, $49.95 transfer fee, and no inactivity fee.
All ETF trades are commission-free and about 2,680 mutual funds have no transaction fee.
Tradable securities include stocks, bonds, mutual funds, ETFs, and options.
There are two trading platforms — online at the Merrill Edge website and MarketPro. There is also a mobile app with many advanced features.
Research and data is free and extensive.
Customer support includes phone and 24/7 live chat.
TD Ameritrade has no account minimum, no stock trading costs, and no base commission on options trades.
Their account fees include no annual fee, $75 full transfer fee, no partial transfer fee, and no inactivity fee.
All ETF trades are commission-free and more than 4,100 mutual funds have no transaction fee.
Tradable securities include stocks, bonds, mutual funds, ETFs, options, futures, forex, foreign ADRs, and IPOs for qualified accounts.
There are two trading platforms, the TD Ameritrade website and thinkorswim for desktops. There is also a mobile website, a mobile app for iOS, and TDA Mobile Trader (comparable to the thinkorswim platform).
Research and data is free and extensive.
Customer support includes 24/7 phone, text, Facebook Messenger, Twitter direct message, Apple Business Chat, and Amazon Alexa.
Fidelity has no account minimum, no stock trading costs, and no base commission on options trades.
They have no annual fee, no transfer fee, and no inactivity fee.
All ETF trades are commission-free and more than 3,500 mutual funds have no transaction fee.
Tradable securities include stocks, bonds, mutual funds, ETFs, and options.
There are two trading platforms, Fidelity.com and Active Trader Pro for desktops and browsers. There is also a mobile app for both iOS and Android users with advanced features.
Research and data are free and extensive.
Customer support includes phone, email, 24/7 live chat, and 197 local branches.
Top Picks for Robo-Advisors
If you’re not really interested in hand-picking your individual investments, then you’ll want to find a provider who will do it for you. There are lots of providers who will build you a custom portfolio of individual investments and then manage the portfolio for you at a modest price. Another great option is automated management service, also called a robo-advisor, who will use your preferences to build a personalized portfolio using low-cost funds. A robo-advisor typically has a much lower fee than a conventional provider, and will regularly rebalance your funds to keep you on track with your financial goals. Here are two renown IRA robo-advisors
Ally Invest
Ally Invest has no account minimum, a 0.35% management fee, and is great for hands-on active investors. They offer low trade fees for ETFs and stocks, and reduce the fees even lower for investors who maintain a high balance and place 30 or more trades a month.
Wealthfront
Wealthfront has a $500 account minimum, a yearly 0.25% management fee, includes automatic rebalancing, and has a wide range of low-fee funds. Their included Path tool helps you plan your financial goals and provides a holistic overview of your finances.
If you want to learn more about your retirement options, contact Human Interest to speak with an expert today.
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The Human Interest TeamWe believe that everyone deserves access to a secure financial future, which is why we make it easy to provide a 401(k) to your employees. Human Interest offers a low-cost 401(k) with automated administration, built-in investment education, and integration with leading payroll providers.
