Rollover IRAs: Proof You Can Take it with You

Most people don't start and finish their careers in their first job out of college. In fact, it usually takes a few starts and stops before they find their "career keeper." But even if you find yourself in the same position for, say, ten years, the odds are that you will probably move on. The important thing to remember - and something that many people forget - is that, every time you switch jobs, you leave behind your 401(k) plan. What happens to it when you're gone?

More than likely, nothing has happened: your hard-earned dollars, put away for a retirement in the Cali, are probably sitting right where you left them. Depending on how long ago you switched jobs or how many times you've switched, you might have a lot of your money simply sitting around doing nothing. Now is the time to put that money back into play, letting it do more than gather dust.

Perhaps your best choice of action is to move all of your old 401(k)s into your own self-directed individual retirement account (IRA) by doing what is called a "rollover." A rollover is exactly what it sounds like: you roll your money from the 401(k) to an IRA. It is a relatively simple and painless process, usually involving one phone call and completing one form.

There are many good reasons to consider a rollover. First, in your own IRA, you have considerably more investment choices then inside of a 401(k) plan. Most 401(k)s only offer 12 to 15 investment choices; and, regardless of whether or not you like some, any or all of those options, they are all that you can use. The cookie cutter/template approach to investing works well for group plans, but it might not net you the returns you need for your specific needs or goals...(Pool, Pool House, Pool Boy...). An IRA isn't as restrictive as a 401(k) and provides an almost limitless supply of investment options.

The second benefit of an IRA is that you don't get "cashed out" if you have a small balance. Some employers may cash you out after you have terminated employment. At that point, you have two choices: take the money as a taxable distribution (pay taxes) and pay a penalty for an early distribution from a qualified plan (20%) or work very quickly to make sure you get it rolled over into an IRA.

A rollover IRA provides you with greater choice than a 401(k) and can potentially protect you from unpleasant tax burdens from cash-outs and other events. IRAs offer so many investment opportunities that it can be a time-consuming and daunting task to filter through them all to find the right ones. A financial professional can help you navigate the account opening process and narrow down your selections to those that best fit your objectives. By putting the management of your IRA in the hands of a trusted financial advisor, you can optimize your investment opportunities and potential asset growth while minimizing the amount of time you would spend managing your plan on your own.

Leaving your old job may be a great career move - just don't leave your money behind, too. Don't wait to rollover your 401(k), take action now.