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401 (k) Essentials

401(k) Plan Basics

401(k)s are an alternative to traditional pension plans and offer more control for the employee. One of the features of a 401(k) is that you can roll it over from one employer to another.  The new plan may have lower fees or investment options that better support your financial goals. Rolling over your old 401(k) into your new company’s plan can also make it easier to track your retirement savings, since you’ll have everything in one place. 

There are a few important factors to consider before you take a cash withdrawal from tax-saving retirement plans. For example, did you know the IRS counts a 401(k) as income and charges penalties and fees on early withdrawals? If you're leaving your job, you might consider other options instead of taking a cash withdrawal.

<h2><strong>Traditional 401(k) vs. Roth 401(k) Plans</strong></h2>

Traditional 401(k) vs. Roth 401(k) Plans

Many people set up their 401(k) plans to make withdrawals for major life purchases, and to use the funds as income after retirement.


There are two kinds of 401(k) plans offered by employers. The Traditional 401(k) is a pre-tax retirement savings plan where no income tax is applied until withdrawals are made. Taxes are deducted directly from an employee's paycheck in regular increments.


A Roth 401(k) is a post-tax retirement plan with no additional taxes imposed upon qualified withdrawal. This means that people who contribute to Roth 401(k) plans can make withdrawals tax-free.


A financial advisor can help employees choose investments like stocks, bonds, certificates of deposits, ETFs, and mutual funds.


With traditional IRA plans, no income tax is applied to employee deductions or investments until it is time to withdraw.

<h2><b>401(k) Rollover Options</b></h2><br/>

401(k) Rollover Options


401(k)s are an alternative to traditional pension plans and offer more control for the employee. One of the features of a 401(k) is that you can roll it over from one employer to another. A plan participant leaving an employer typically has four options (and may engage in a combination of these options), each choice offering advantages and disadvantages.

  • Leave the money in his/her former employers plan, if permitted
  • Roll over the assets to his/her new employer's plan, if one is available and rollovers are permitted
  • Roll over to an IRA
  • Cash out the account value

Frequently Asked Questions

  • There are a few options available for managing your 401(k) when you leave your job or get a new employer. When you choose 401(k) rollover options, rolling over your 401(k) to a new employer's plan is an option as long as the new employer offers retirement savings options. Depending on the plan, you may be able to borrow money from your account

  • In most cases, you won't lose money when you roll over an IRA. A rollover of funds will move your 401(k) balance from your original account to a new account.

  • If you're wondering whether to roll your 401(k) into an IRA, there are a few factors to consider. 401(k) plans offer protection from creditors under federal law.  

Have more questions about IRAs?

Don't navigate this difficult process alone. Let us help you to better understand all of your options, to find out more about the Roth IRA conversion process and if it is the right fit for your financial needs.

Want to go over your 401(k) distribution options?

 A financial advisor can help you understand your choices.

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