Why Create a Roth 401k Rollover?

Roth 401k rollover

Whenever most employees move from one job to another, they often leave retirement savings that they accumulated in their old employer's retirement plans. As most will change jobs at least one time in their lives (in reality, the average number of job changes is said being closer to 5-7 times), this results in a number of 'abandoned' retirement savings accounts. These balances are still growing, though no new money is being added to their particular balances.

If the funds are growing on their own, can't they only be left alone until retirement? While the answer is formally yes, you're missing out on a substantial number of advantages in case you choose this course of action. What you'll need is a Roth 401k rollover to make the most of these pots of money.

A Roth 401k rollover account is a Roth IRA into which you move your funds from your earlier employer-sponsored plans, whether they have been traditional 401k accounts, SEP IRAs or any other type of qualified retirement savings account. Consolidating the funds into an individual Roth 401k rollover account features two distinct advantages:

1. Easier Management. When you have a single Roth 401k rollover account as opposed to seven 401k accounts, the supervision and reporting of one's retirement savings obviously becomes easier. Although most people take a fairly passive procedure for managing their savings, the reality that some action is critical in order to get the most out of your own savings. For example, your current retirement portfolio needs to be regularly rebalanced in order to ensure that the allocation you have set is in place. If you have decided to have 50% on stocks and 50% in bonds, you best do some buying and selling each year or you could find that a rising stock market has pushed your allocation to 80% stocks, 20% bonds. You would then be taking on a lot more risk in your Roth 401k rollover than desired.

2. Better Returns. Studies have shown more employees participate in employer-sponsored retirement plans when much less investment options are offered. Consequently, most companies limit their offers to a few basic options -- maybe a single US stock index fund, a worldwide option and a few life cycle funds. Moving your money into a single Roth 401k rollover account presents unlimited options. Your returns can also improve because the costs of your own own will e far less than the 401k fees encountered in most 401k plans.

As you can see, there are pretty significant benefits to consolidating retirement savings into an individual Roth 401k rollover account. To start off the Roth 401k rollover procedure, you'll need to first create a new Roth 401k rollover and then contact the particular representatives of each of the old 401k plan accounts to be able to request the records necessary to complete a Roth 401k rollover transfer.