The basic function of 401k rollovers to IRA is to give you more control of your money. Within the confines of a traditional 401k structure, your fund options are limited. If you open and roll your money to an IRA, you have all the funds that the firm uses at your fingertips. This can be both good and bad, depending on your temperament. If you have the discipline to research the funds and take a long view of their performance, then an IRA is a great idea. You can have your money working smarter for you. If you fancy yourself as a day trader, then your nest egg will erode in the face of transaction fees. As the Greek philosopher said “Know thyself.”

You actually don’t have to be in transition between jobs to consider a rollover 401k to IRA. With most plans, you can decide to do it any time. Do check with your admin person. What are the 401k rollover to IRA rules? One of the nicest benefits to a rollover is that the money that initially lands in your brand new IRA is not considered as part of the year contributions when calculating the contribution cap. In other words, if you put in $20,000 into your IRA as a rollover, you still have the maximum contribution available to you for that calendar year. It is a great way to turbo-charge your IRA!

Many people, as they consider a 401k rollover to traditional IRA, worry about splitting their retirement funds, and about having enough money to fund more than one account. If you have got a budget under control, this should not be a concern. If you can afford it, put 7% of your paycheck into the 401k and 7% of your paycheck into the IRA. That means you are putting just 14% of your pay to retirement. It’s double what most people do and still conservative by any measure.