Moving a 401k into an IRA is a common step at retirement or after a job change. Here is exactly how it works.
How does a 401k rollover to an IRA work?
You open an IRA, then ask your 401k plan administrator to send the balance directly to that IRA. In a direct rollover, the funds move trustee-to-trustee, so no taxes are withheld and the transfer is not taxable. Your money keeps growing tax-deferred. Most retirees choose this route because it avoids the 60-day redeposit deadline and the 20% withholding that comes with taking a check yourself. Once complete, you manage one account with a broader range of investments. For step-by-step help, call 1-800-MEDIGAP at 1-800-633-4427.
Why roll a 401k into an IRA?
An IRA typically offers far more investment choices than a workplace 401k, often with lower fees and no ties to a former employer. Rolling over also lets you consolidate several old accounts into one, simplifying required minimum distributions and reducing paperwork. You keep the tax-deferred status, so there is no immediate tax hit on a traditional-to-traditional rollover. For seniors juggling retirement income and Medicare decisions, simplifying accounts can make the whole picture easier to manage.