- What we're going to be talking about in this video today,
is how to rollover your 401k.
A lot of people are clueless
when it comes to retirement accounts,
and the different things that you can do.
They have these old 401ks that may be sitting around,
that they just don't know what to do with.
One of the options that you have
is to rollover your 401k,
either into your new 401k,
or you can actually roll this over into
a couple of different retirement accounts.
That's what we're going to explain in this video.
Is what you can do with that old 401k from a previous job,
and also why you may wanna actually
rollover a 401k in the first place.
not all 401ks are created equally.
Some 401ks are really good investments that hold
low fee index funds,
or low fee investments.
Other 401ks are loaded with fees,
and they are just not good investments.
That is one of the problems with the 401k,
is that there all kinds of different plans out there.
Unfortunately, what ever provider your employer picks,
you are stuck with that particular plan.
If it's a good plan, then you are in good luck.
But, if it's not a good plan,
there's pretty much nothing you can do,
except for rollover that 401k
into a different type of retirement account,
that you may have more control over.
One of the things that you can do with a 401k,
is to rollover a bad, or old 401k,
into a different type of low fee IRA.
I'll show you guys a couple of examples of that,
or options in a little bit.
You basically have to transfer the funds from this old 401k,
into a new IRA, or another 401k,
within 60 days to fall into the IRS limit here.
Otherwise, you will get charged a penalty,
and the taxes associated with dipping into that 401k early.
So you definitely want to make sure
that you do this in a timely manner,
to fall within that 60 day window.
The very first thing you have to ask yourself,
when you are looking to rollover a 401k,
if you are going to be opening a new account,
is where are you going to open this new account.
I have two different recommendations
I'm going to make to you guys.
Number one, if you're looking for the best
low fee retirement account option out there,
in my opinion, that is going to be M1 Finance.
They offer completely fee free retirement accounts,
and the minimum balance to open an account with them,
is just $500.
They also have a very easy rollover process,
if you do decide to rollover a 401k, to M1 Finance,
and open up an IRA over there.
That, in my opinion, is the best option
for a fee free option, for a 401k rollover.
If you are looking for a fully managed portfolio,
my second recommendation is going to be Betterment,
which is actually a robo-advisor.
They charge a small asset management fee of 0.25%,
which is still a lot lower than what you're going to pay
to a traditional in-person financial advisor.
The advantage to using Betterment,
is there are a number of different advantages,
such as tax coordinated portfolios.
They also fully manage your portfolio,
automate it, they rebalance it.
They take care of all those other aspects
that you may not want to deal with as an investor.
So Betterment in my opinion, is the best option for
a low fee, yet managed approach, to a rollover.
I'm going to include links to both M1 Finance,
and Betterment, in the description below.
These are affiliate links.
You don't have to use them if you don't want to.
But, I certainly do appreciate it,
as it helps to support my channel,
and allows me to make more videos like this.
I'll also include reviews to both M1 Finance and Betterment,
if you wanna learn more about
both of these investment options.
After you go ahead and figure out where
you're going to open your new account,
the next thing you wanna ask yourself,
is what type of account do you want to open.
The first thing I want to point out to you,
is that you may not actually have to
open up a new account at all.
If you already have an existing IRA with somebody else,
maybe Fidelity, maybe it's Vanguard,
whoever it's through.
If you already have an IRA,
you may be able to just consolidate these two accounts,
and roll that 401k into an existing IRA.
If you like to keep things simple,
and you already have an IRA somewhere else,
one of your options is to reach out to that institution,
and ask them if you can rollover your 401k
into that existing IRA.
If you don't have an IRA, that's not a problem.
Like I said, you can open one with M1 Finance,
or Betterment, or any institution out there.
But these are the different accounts
you can potentially open, and roll your 401k into.
The most common way to do it, is to roll your 401k
into just a Traditional IRA.
You're not gonna pay any taxes.
It's going to be a relatively simple process.
Option number two, is to rollover your 401k
into a Roth IRA,
and that's going to be a slightly more complicated process.
Because, what you have to do in that case,
is roll your 401k into a Traditional IRA,
and then do what's called a Roth IRA conversion.
When you do this you're going to have to pay taxes.
Because it's a different type of account,
moving from a 401k, or a Traditional IRA, to a Roth IRA,
but there are definitely some tax benefits
associated with that.
You do wanna consider that option
of whether or not you want to open up a Roth IRA,
instead of a Traditional IRA.
It's important to note here,
that both Betterment and M1 Finance,
both offer the Roth IRA option,
and the traditional IRA option.
The next option you have,
which is probably not going to be common,
is to roll your 401k into a SEP IRA.
That's a specific retirement account
for people who are self-employed.
Maybe you left a job to go start your own business,
and you've set up a SEP IRA.
One of the options you have
is to roll that old 401k into that.
Then finally, let's say you left your job
and you're working at a new job now,
well you can roll a 401k into another 401k.
All you would do is reach out to your new 401k provider,
and ask them for instructions on that process.
I would say 90% of the time what you're going to be doing,
is just rolling your 401k into a Traditional IRA,
unless you wanna roll it into your new employer's 401k.
That's going to be an option for you as well.
Doing the SEP IRA is not very common.
Even if you do decide to roll your 401k
into a Traditional IRA,
down the road you can make that decision
to do a Roth IRA conversion.
Where you do ahead and pay the taxes,
and convert that to a Roth IRA.
You may want to talk to a financial advisor
about the tax benefits, or tax implications of that move.
The third step, after you've figured out
where you're going to open an account,
and what type of account you're going to be opening,
is going to be, figuring out your investing strategy.
If you wanna be a self directed investor,
that's somebody who's actually
picking the investments themselves.
I would definitely recommend M1 Finance,
because that allows you to put
what ever you want, within that IRA.
If you want it to be ETFs,
if you wanna invest in Vanguard bond ETFs,
if you want to invest in individual stocks,
you can do that within your IRA through M1 Finance.
You pick and choose those investments.
If you wanna be an active self directed investor,
you can do that completely free,
through M1 Finance.
If you're looking for TDFs,
which are target-date funds,
those are actually offered through both
M1 Finance, and Betterment.
If you're looking for a free option,
M1 Finance doesn't charge any type of fees
for using those TDFs.
If you're not familiar with that,
that is a target-date retirement fund,
and basically it's going to reallocate that portfolio,
as you get closer to retirement.
To make sure that you aren't too aggressive,
or conservative with that portfolio.
TDFs are a very solid option for retirement investors,
especially if you're looking for
a passive hands-off approach.
Then if you're looking for a passive or managed solution,
where you basically don't have to do anything,
that is when I would recommend Betterment.
You pay them that 0.25% per year,
they manage, they rebalance the portfolio.
They take care of all of that.
You don't have to do just about anything with that.
Then the fourth and final step here.
Once you've made your decision here,
on all these previous steps.
Is to follow the rollover procedure.
It's going to be a little bit different,
depending on which institution
you are rolling over your 401k from.
I would say that, of the two options I mentioned,
Betterment does have the best rollover process.
They have a very dedicated team to this,
and they're gonna do as much as they possibly can for you.
In some instances you may have to jump on the phone
and make a phone call, or send in some paperwork
to facilitate this rollover process.
But the basic steps go like this.
Your 401k provider is going to sell off these assets,
and they are going to either mail you,
or your new financial institution,
what is called a rollover check.
Then that money has to be deposited,
and funded into that account,
within 60 days to meet that IRS limit.
It's not like you have to do this overnight,
but you do have two months to work with, just about.
You definitely don't wanna sleep on it.
You wanna make sure it's a pretty fast process.
Then after that point, you have rolled over your 401k
into a new retirement account.
That's basically the process at the end of the day.
Anyways guys, that's gonna wrap up this video.
That is how you rollover a 401k.
I would definitely say,
do this sooner rather than later.
If you're sitting there investing in a bad 401k,
that's loaded with fees,
it's just going to be costing you money
year after year.
Or it's possibly just causing you stress,
having all these different accounts in different places.
There's definitely a lot to be said about
consolidating accounts,
and being better organized.
Like I said, if you do want to open an account
with either M1 Finance, or Betterment,
I have provided links in the description below,
if you choose to use them.
And I'll also include some articles,
and videos I've done,
reviewing these two investing platforms.
Just so you guys have a better understanding,
of what these platforms can do for you.
Thank you so much for watching this video.
I hope you enjoyed it,
and I will see you in the next one.
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