What is a 401k Retirement Plan Rollover?

One of the best 401k retirement plan consultants in Grand Rapids Michigan

So, you’ve left your job, or plan to, but still have a 401k retirement plan with your old employer, with a tidy pile of money in it.
Question: What should you do with it?
You’ve got four options:

  • Cash it out.
  •  Leave the money in your old company’s plan.
  •  Move your money into your new employer’s plan.
  •  Roll it over to an IRA

 Go for a 401k rollover to an IRA.

Integrated Financial Services, Inc. is a 401K consulting firm that specializes in planning and implementing 401K rollovers consistent with your long-term goals and risk tolerances.

However, the first option is rarely the best one. If you cash in your 401k retirement plan, the tax consequences can be stunning. Almost all, 401k retirement plan consultants will advise you against it. Among the drawbacks: your employer is required to withhold 20% for federal income taxes, you’ll pay a 10% premature withdrawal penalty, (if you are younger than 59½), and the money will no longer be tax-deferred for your retirement. In addition, since it will be counted as taxable income in the year you receive it, you may find yourself in a much higher tax bracket. On larger balances, it’s common to see a 35-40% loss due to these factors. On the other hand, The tax benefits of rolling over your 401k plan to another tax-qualified plan are many. 401k retirement plan consultants or 401k plan advisors can help you weigh the pros and cons before you make a decision.

The other 3 options preserve the tax-deferred status. If you rollover the funds of your 401k retirement plan, make sure you choose a ‘trustee to trustee’ transfer, also known as a “direct rollover.” With this method, your old employer writes a check directly to the custodian that administers your new plan. This avoids taxes, penalties, and the mandatory 20% withholding requirement.

Here are the pros and cons of each option as listed by our 401k
retirement consultants at Integrated Financial Services Inc.

Reasons not to rollover your 401k to an IRA

401k to IRA Rollover– There are a few reasons why you may choose not to rollover your 401k retirement plan

  • The investments and expenses of the old 401k are so attractive, they cannot be replicated.
  • 401k plans have loan options– IRAs do not.
  • If you’re still working for your employer at age 72, you can delay taking Required Minimum Distributions (RMDs) until you retire. Funds in IRAs must begin RMDs at the age of 72.

Note:  If you have less than $5,000 in your 401k, your old employer may require that you remove your funds from the plan after leaving.

Most conventional 401k Plan Consultants by Integrated For Me, Grand Rapids Michigan

Rollover an old 401k Retirement Plan to a new employer’s 401k Retirement Plan

401k consultancy in Grand Rapids, Michigan
  • This option may be worthwhile if you have a smaller balance or you like the investment’s options and costs of the new plan.


  • It allows you to consolidate 401k retirement plans giving you one less account to worry about.

Rollover your old 401k Retirement Plan into an IRA

Conventional wisdom has long been to take your 401k retirement plan with you and roll it into an IRA that you control. For up to 95% of retirees, this may be the best option for many reasons. Many 401k plan consultants and financial advisor favor this choice.

IRA vs 401k

You can set up your own plan for your nest egg, with the investment options that you choose. 401k retirement plans are established by your employer and it is their plan- you are just a participant.  You are subject to the rules they have adopted.  You are limited to the 20 or so allocation choices that the company allows with the custodian that they have chosen. Rolling to an IRA may make sense as you have a much broader range of investment options. You can choose from over 10,000 mutual funds, and just about any individual stock, bond, annuity, or ETF. With many custodians, a huge selection of no-load mutual funds is offered to choose from with hundreds of different fund companies.

  • You can divide your funds into goal specific allocations. You can do different things such as income with a portion of your funds that are not available in a 401k retirement plan. Example: setting up a stream of lifetime monthly income that you are guaranteed never to outlive– like a traditional pension. 
  • If you choose to set up a Rollover IRA to receive your 401k retirement plan into a Traditional IRA — aka not a Roth — you won’t have to pay any taxes when you switch your account according to the Internal Revenue Service rules which govern the tax treatment of 401k to IRA rollovers. If you have under-performing funds, you can make changes as you choose. 401k plans historically are slow to change their investment allocation options, based on performance or fees.
401k plan advisors in Grand Rapids, Michigan
  • More options for early withdrawals: Traditional IRA allow early distributions without penalty — (taxes are still owed) — for higher education expenses and a first-time home purchase.
  • Inservice Rollovers. Many 401k retirement plans allow Inservice rollovers and withdrawals for individuals who are age 55 or older (often age 59 ½). With these provisions, an employee can take all or part of their 401k balance and roll it over to an IRA of their choice as an Inservice Rollover. They can remain an active participant in their employers’ 401k retirement plan and still continue to receive the company match on employee contributions. Often individuals who are approaching retirement are concerned with large potential losses and want investments that are not offered by the 401k retirement plan. Seeking help from a 401k consultant makes it easier for them to better understand the situation and set their expectations.

Can you rollover an IRA to a 401k Retirement Plan?

Yes. You can rollover IRA to 401k retirement plan, assuming the plan allows this type of rollover. Roth IRAs can only be rolled over to another Roth IRA. You can always check with your 401k consultant or human resource department to check whether your retirement plan allows you to do such a rollover. This is one of the least know options in 401K retirement planning.  It is an illustration of why it pays to work with professionals’ consultants who know the rules. An IRA to 401k rollover, typically doesn’t receive much attention as it is uncommon. It might be worth considering for the following reasons:

Most efficient 401k planning services by Integrated For Me
  • Potential for early access to your money: This little known provision of some 401k retirement plans is that if you retire after age 55, but before age 59½, you may be able to start tapping your 401k without penalty. If you retire earlier than 55, this provision doesn’t apply. Qualified distributions from traditional IRAs can’t begin until 59½ unless you start a series of substantially equal distributions known as a 72(t) plan. This is where you set up distributions for at least 5 years or until you turn 59½, whichever comes last. You must use an IRS approved calculation method which factors in your IRA balance, age, life expectancy, and a reasonable interest rate, based on treasury rates. It could mean taking much more or much less than you need or receiving the income for a longer period than you want to.
  • If you work past age 72, you may be able to put off distributions. A traditional IRA required minimum distributions to begin at age 72. A 401K does too – IF YOU ARE RETIRED.  However, if you’re still working, you can postpone required minimum distributions from a 401K until you retire.

Are rollovers permitted from 403b Retirement Plan to a 401k Retirement Plan?

Yes. According to The Internal Revenue Service (IRS) you can do rollovers between 403b and 401k plans, IF your employer allows it.
401k plans: are used by “for profit” corporations (the private sector)
403b plans: are used by “not for profit” and governmental entities.
In the real world, employers don’t maintain both types of plans.
If you changed jobs and moved from the private sector with a 401k retirement plan to a non-profit employer who offers a 403b retirement plan, you could rollover the balance of your 401k to a 403b IF your new employer’s plan accepts rollover 401k to 403b & vice versa

One of the numerous reliable 401k retirement plan consultants in Grand Rapids


While the IRS regulations allow the rollover of assets between 401k retirement plans and 403b retirement plans, employer’s plan documents must be written to allow such rollovers.
If you have questions about your own situation, please call us at (616) 942-9080 and we will be happy to answer any questions that you may have.

Frequently Asked Questions

You should consider all of the benefits and drawbacks of rolling over your 401K plan to an IRA. However, you will find there are many reasons why the vast majority of qualified 401k plan consultants recommend this course of action to most retirees. Among the reasons: greater choice of investment choices, among mutual funds, ETFs, managed money accounts, individual stocks, bonds and other securities, annuities real estate, alternatives, choosing your own custodian, dividing your balance and allocation by goal specific needs, etc. 401k retirement plan consultants will point out the differences that each option entails which can be tailored to your specific retirement needs. Why go it alone, when you have available top 401K plan consultants just a phone call away.
A 401K is a retirement plan set up by For-Profit Employers for the benefit of their employees. It is a defined contribution plan, which means that it does NOT pay out a certain benefit upon retirement, its potential benefits are determined by the amount contributed and the rate of return of the investment allocations selected. A 401K consultant can explain which allocation options may be best suited to your needs and risk tolerances. 401K consulting firms are trained to answer the question pertaining to your retirement plans and time horizon (how long before you need to access your funds).
Every course of action contains advantages and disadvantages. Discernment is needed to weight the benefits to the costs. 401K plan consultants can help you determine how to do this. Advantages include, you get to choose your own IRA custodian rather than being stuck with the custodian selected by your former employer. You get to choose among thousands of options for your allocations (where to place your money) rather than being stuck with the 20 or so prepackage choices of your employer’s plan. Disadvantages: 401K Consulting Firms can help you understand the costs (expense ratios) of a 401K which are sometimes less than the costs of mutual funds that are available with IRAs. Keeping the plan with your former employer doesn’t require any effort on your part. However, it is often worth the effort to obtain a successful retirement plan.
The Chinese saying: “Even the longest journey starts with a single step” applies to opening a 401K Plan. A qualified 401K Plan Consultant can help set up your account to serve your future needs. One of the best ways to accumulate wealth is with a systematic savings plan, where each pay-period, you contribute to your future. Due to the magic of compound interest, the dollars that you save early on, do far more than the dollars that you contribute decades later as you near retirement. 401K Retirement Plan consultants will tell you to “Pay yourself First”. Having a payroll deduction plan is an excellent way to start as the money is taken right out of your paycheck before you ever see it. Leading 401K consultants will tell you to contribute AT LEAST enough to maximize the employer match. 401K consulting firms also recommend that you contribute at least 10% of your income towards retirement, which will save taxes, as the contributions are made with pre-tax money.
A 401K has two separate stages: First the accumulation stage. During this period of time, 401K retirement plan consultants encourage you to fill your plan with as many dollars as you can afford. This provides the capital along with any employer match to allow your investments to grow and compound. The second stage is the disbursement stage which is designed to occur AFTER retirement when you need retirement income. You can typically leave your 401K balance in your employer’s plan after retirement, or as most 401K plan consultants recommend roll it over into a self-directed IRA where you can choose your own custodian and investment options tailored to your specific needs by top 401K plan consultants.
A Roth 401K is a plan set up for employees with an important difference concerning taxation. 401K plan consulting firms will explain that traditional 401K plan contributions are made with pre-tax dollars (so you save taxes up-front) which accumulate tax-deferred, until distribution. At that time, the withdrawn funds become taxable as ordinary income. Roth 401K consultants will explain that unlike traditional 401K contributions, Roth 401K contributions, are made with after-tax dollars, which accumulate on a tax-free basis and are paid out 100% income tax-free. 401K plans that are designated as Roth 401K plans, provide income tax savings at the end during retirement not as you contribute. Often, the younger you are when you begin a Roth 401K, the greater the advantage over a Traditional 401K plan. Qualified 401K Plan Consultants can show you the mathematical advantage of a Roth 401K plan.
Frequent Searches: 401k retirement plan consultants, 401k plan consultants, 401k consultant, 401k plan advisors, 401k benefits, 401k consulting firms,
401k retirement plan