Exactly Why People Transfer Their 401k To IRA

Named after the Internal Revenue Section 401k which explains the program, 401k is a form of retirement savings account offered in the United States. This program was established in January 1st in the year 1980, with the very first plans formally used by U.S. citizens in January 1982. A 401k plan is a retirement plan established by employers where the employee can elect to make contributions to the account via salary deduction. IRA or the Individual Retirement Plan, on the other hand, is a type of retirement plan that allows an individual below 70 years and 6 months, and who has some form of earned income to save money for retirement. These plans are both qualified for tax benefits and other added advantages. There are quite a few reasons why people decide to transfer their 401k to IRA.

A person transfers his 401k to IRA because he is quitting his job and he no longer wants his previous company to handle his 401k funds. An individual opts o transfer his 401k to IRA so that he can make desired investments without the potential restrictions that his previous employer may implement later on.

A person is apt to rollover his 401k to IRA because he is leaving his job and he doesn’t want to withdraw his funds. He is aware that withdrawing funds before the age of 59 and ½ will cost him an early withdrawal penalty tax of 10 percent. This would mean that his $100,000 savings will go down to $90,000 if he withdraws the funds early. This will cost him a total of $10,000 worth of losses. That is really huge, and he knows it.

A person transfers his 401k to IRA because he is not completely content with the 401k plan that he has at the moment. He opts to transfer his 401k plan because he wants to personally take care of his investments. He no longer has the identical investment needs and wants as he did in his 401k and now wants to explore his options by himself.

Certainly, people have different reasons for transferring their 401k to IRA. But no matter what their reasons are, the more important thing is that these people are aware of the importance of saving money for the future. They know that saving money today will give them a happy retirement later in life.

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