The decision to roll over your 401(k) plan or other retirement plans is an important one.
Done properly, there are many benefits, which is why so many people actually do rollovers. But if you make any mistakes, a rollover can come with serious consequences, namely costly penalties and increased taxes. The crucial difference is information – knowing what to do and when to do it.
"People think it's straightforward: they retired, or they left their job, so they think they should do a rollover," certified financial planner Marguerita Cheng told CNBC. "But there are mistakes that can happen."
Moving your retirement assets from one place to another doesn't need to be a stressful event if you put in the time and energy to research your options. Obviously, the more you understand how the process works, the better. Taking the time to plan your rollover ensures that nest egg you built over the years doesn't take an expensive tax hit.
There are several reasons why people choose to do a rollover. To preserve the tax treatment of their savings; they don't want to leave their assets with their employer; they want more investment options; they want to use a different financial services provider; they want to consolidate assets.
With that said, consider why you want to do a rollover and then weigh the pros and cons. This will allow you to know which options are best suited for your financial needs and your retirement plans.
As always, when it comes to money matters, educating yourself before you do anything is the best way to protect your hard-earned retirement savings from unnecessary penalties and taxes. If you do find yourself overwhelmed or have questions you just cannot figure out, you can always turn to a financial professional for assistance.
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