When you get nearer to your retirement, most people will need the income from the retirement accounts they have maintained and set in the past. It may be possible that most of the people will transfer their old 401(k) plan or accounts to IRA, as the process is simple in the later one to manage the retirement money.
One more fact is that you can also combine all the retirement account into one single IRA, but it should be your accounts and spouses can’t combine accounts. If you are having 401(k) plan and need to transfer into an IRA then you can follow the guidelines given below:
Try To Choose The Financial Services Company You Would Like To Work With
It is always a good idea when you would like to choose the financial company who work as your custodian for your retirement account(s). You can also opt to manage your investments then you can pick Vanguard, Fidelity, etc.
You can also opt to work with a financial advisor, but you need to pay them, the brokerage or custodian which they will need to open your account(s) which you may be needed.
At this point, few people are prone to make mistakes as they spread their money into multiple companies so that they can have diversified investment, but this is not the time to do that when you are on the verge of retirement.
The best way is to open an account in a single company and then spread your money across multiple investments through that account.
It is always advisable to use the well-protected type of custodian to get yourself away from frauds, and when you open your account in one company, then it will be easier for you to manage and distribute your retirement money.
Educate Yourself To Know Which Retirement Account Can be Combined Together
The retirement accounts which are most common can be combined in one IRA account and one Roth Ira account. Let’s say for the example you can transfer your 401(k) plan if you have left the employer into your IRA account this is called Rollover.
You will not have to pay any taxes or penalties as it is a good idea to transfer your 401(k) account to an IRA through IRA rollover, as it is considered as a direct transfer from one type of retirement account to another. You will only pay the taxes in your new IRA when you withdraw from your new account.
You should also learn about the age rules related to retirement accounts, and if you are between the age of 55 to 55 1/2 years than before moving your money from 401(k) plan you should understand the 401(k) retirement age rules, so that you won’t fall into pay any undesirable taxes or penalties.
You can transfer all type of 401(k) accounts seven its variants, SEP & SIMPLE accounts, KEOGHs & Individual 401(k)s account including 457 plans into one single IRA account. And it will always be easy to update and manage a single account rather than handling so many accounts.
To change beneficiaries will be easy for you, manage investments and withdrawals. At the age of 70 1/2 years you would need to minimize your withdrawals, and if you have multiple accounts, this will not be easy for you to manage.
If you have tax contribution in your 4019k) plan or maybe in some other retirement accounts then it is advisable to transfer them in Roth IRA account. If you enter your retirement with the accounts – IRA, Roth IRA & one regular/brokerage/mutual fund/saving account (not considered as retirement account) then it will be ideal retirement accounts situation.
IRA Rollover Account Establishment
First of all, you should have an IRA account and have an account number, and you can always open your IRA account with the company of your choice and no need to put any money into it at the initial level. You just need your company to know that you are transferring your 401(k) account or another retirement account into IRA.
After setting your IRA account, you should contact your old employer or retirement plan administrator and if you would like to rollover money from your 401(k) plan to your IRA account, let them know. You will find the contact details of your plan administrator in your retirement account statement.
After getting them informed you need to complete some paperwork sent to you, in some companies rollover is possible over the phone also just you need to provide them custodian information & your IRA account number.
In most of the retirement account they send you the check by emails, and then it is all up to you how much time will you take to get your new IRA custodian. Bear in mind that the IRA rollover should be done within the sixty days or otherwise it will be liable to taxes as considered as distribution.
Few of the retirement plan directly transfer the funds into your account or sometimes mail them to your new IRA account. You should always ask for the options and need to utilize whichever is comfortable for you, direct fund transfer into your account will save your much time and energy.
Select Investment In Your IRA
One you have consolidated the funds in your new IRA account, you can then choose and select what types of investment belong to that account. Make your investment plans and always match up your investments with your need and expenses. You should also allow some time for your investments to grow and you will withdraw them when you most need them.
If you need some money next year, then you won’t make any aggressive investments, which will be risky or volatile as we see in the stock funds. You will always need to invest that amount into something safe so that when you need it, you can easily have it.