What is a Rollover 401(k): How Can it Benefit Your Investment Plan?
Retirement fund investment is one of the safest options for a comfortable post-retirement life. Many employers in the country offer these funds as part of employee benefits. About 67 percent of workers in private industries have had access to retirement funds. Employers take a dedicated portion off your taxable income and place it in these funds. You can use this amount and put it in stocks and bonds or invest in precious metals for tax-free growth.
What is 401(k)?
A 401(k) is an employer-sponsored retirement investment and savings plan. Employees who contribute to a 401(k) plan receive a tax credit on their contributions. Employee contributions are deducted automatically from salaries and deposited in funds of the employees’ choosing.
There are several options for an individual to invest in. Some people invest in stocks and bonds, whereas others buy gold bullion bars and coins to be kept safe and grow in value.
401(k) is the best retirement funds option, particularly due to its 5 to 8 percent returns. About 32 percent of people from the working class have a 401(k), amounting to about 6 million employees from the private sector.
The average individual can contribute a limited amount of $20,500 in 2022, previously at 19,500 in 2021. Older employees above 50 have a maximum contribution limit of $27,000 US dollars, previously at $26,000 in 2021.
It’s normal for an individual to switch jobs for better exposure and learning opportunities. So, what happens to the employer’s investment fund when a person decides to work for another employer?
This is where Rollover IRA comes in!
What is Rollover IRA?
This type of investment account allows you to transfer funds from your previous retirement plans like 401(k) to an IRA. If done correctly, An IRA rollover has the advantage of keeping the money tax-free and without triggering taxes or penalties that are applicable for early withdrawal.
Benefits of Rollover 401(k)
Compared to a 401(k), which may have fewer investment possibilities and higher admin fees, rollover IRAs can offer a variety of investment choices and lower expenses.
Following are some other benefits for rolling over your 401(k) to an IRA:
- Investment options help you choose the funds of your choice. You can invest in gold, stock, bonds, or other exchange funds.
- Better Communication helps you communicate your motives and queries. It’s tough to reach out to your former employers to inquire about your 401(k).
- Low Fees help you save more on your contributions every month.
- Inheritance money passed to your family after your death is greater in an IRA than a 401(k). 401(k) is paid out in a lump sum, while an IRA has several payment options that you can use to your advantage.
Orion Metal Exchange has been a precious metals investment dealer in Los Angeles for over 50 years. We have vast experience in providing secure gold & silver storage solutions and consultation for a safe retirement plan or precious metals IRA.